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3M India Limited

3M India Limited

3M India Limited

3M India Limited

3M India Limited

3M India Limited

3M India Limited

3M India Limited

3M India Limited

3M INDIA LIMITED
REGD OFFICE : PLOT NOS. 48 - 51, ELECTRONICS CITY, HOSUR ROAD BANGALORE - 560 100

NOTICE TO THE MEMBERS


Notice is hereby given that the Twenty Sixth Annual General Meeting of the Company will be held at 10.30 A.M. on Tuesday, the 23rd July 2013 at The Grand Ball Room, Hotel Chancery Pavilion, 135, Residency Road, Bangalore 560 025, to transact the following business: ORDINARY BUSINESS : 1. To consider and, if thought fit, to pass, with or without modification, the following resolution as an ordinary resolution: RESOLVED THAT the Audited Balance Sheet as at March 31, 2013, the Profit and Loss Account of the Company for the year ended as on that date together with the Auditors' Report thereon and the Report of the Board of Directors covering the same period be and the same are hereby approved and adopted. 2. To consider and, if thought fit, to pass, with or without modification, the following resolution as an ordinary resolution: RESOLVED THAT Mr. B.S. Iyer, a Director, who retires by rotation at this meeting, and being eligible for re-appointment, be and is hereby re-appointed as a Director of the Company. 3. To consider and, if thought fit, to pass, with or without modification, the following resolution as an ordinary resolution: RESOLVED THAT Mr. B.C. Prabhakar, a Director, who retires by rotation at this meeting, and being eligible for re-appointment, be and is hereby re-appointed as a Director of the Company. 4. To consider and, if thought fit, to pass, with or without modification, the following resolution as an ordinary resolution: RESOLVED THAT the retiring Auditors, Messrs. Lovelock & Lewes., Chartered Accountants, holding Firm Registration No.301056E, being eligible for re-appointment, be and are hereby appointed as Auditors of the Company for the financial year ending March 31, 2014 to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting of the Company on a remuneration to be fixed by the Board of Directors. SPECIAL BUSINESS: 5. To consider and, if thought fit, to pass, with or without modification, the following resolution as an ordinary resolution: RESOLVED THAT pursuant to Article 115 of the Articles of Association of the Company and Section 260 of the Companies Act, 1956, Mr. Frank R Little be and is hereby appointed as a Director of the Company. 6. To consider and, if thought fit, to pass, with or without modification, the following resolution as an ordinary resolution: RESOLVED THAT pursuant to Article 115 of the Articles of Association of the Company and Section 260 of the Companies Act, 1956, Mr. John R Houle be and is hereby appointed as a Director of the Company. By Order of the Board Place : Bangalore Date : May 30, 2013 NOTES : (1) A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT ONE OR MORE PROXIES TO ATTEND AND VOTE INSTEAD OF HIMSELF AND SUCH PROXY NEED NOT BE A MEMBER OF THE COMPANY. A PROXY, IN ORDER TO BE EFFECTIVE MUST BE DEPOSITED/LODGED AT THE REGISTERED OFFICE OF THE COMPANY NOT LATER THAN 48 HOURS BEFORE THE TIME FIXED FOR HOLDING THE MEETING. (2) Explanatory statement pursuant to Section 173 of the Companies Act, 1956, in respect of Special Business is annexed hereto. (3) The Register of Members and the share transfer books of the Company will remain closed from July 17, 2013 (Wednesday) to July 23, 2013 (Tuesday), both days inclusive. (4) The shares of the Company are mandated by the Securities and Exchange Board of India for trading in dematerialized form by all investors. Members holding shares in physical form are advised to dematerialize their shares to avoid the risks associated with the physical holding of such share certificates. V.Srinivasan Company Secretary

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NOTICE TO THE MEMBERS


(5) The Registrar and Transfer Agent M/s. Karvy Computer Share Private Limited, Plot No. 17-24, Vithal Rao Nagar, Madhapur, Hyderabad 500 034, is handling registry work in respect of shares held both in physical form and in electronic/demat form. (6) Members are requested to bring their copy of the Annual Report and the Attendance Slip to the Annual General Meeting. ONLY MEMBERS/ PROXIES WILL BE ADMITTED INTO THE HALL FOR THE MEETING. (7) In respect of items 2, 3, 5 and 6 of the Notice, members may refer Additional Information on Directors recommended for appointment / re-appointment under clause 49 of the Listing Agreement. (8) Members holding shares in electronic form are requested to register their e-mail address with their respective depository participants and members holding shares in Physical form are requested to register their e-mail address with the Companys Registrar and Transfer Agents and participate in the "Green initiative" launched by the Ministry of Corporate Affairs in future. (9) Members holding shares in physical form are requested to notify to the Companys Registrar and Transfer Agent of any change in their address and update their Bank account details. Members holding shares in electronic form are requested to notify any change of address and update bank account details to their respective depository participants directly. ADDITIONAL INFORMATION ON DIRECTORS RECOMMENDED FOR APPOINTMENT / RE-APPOINTMENT UNDER CLAUSE 49 OF THE LISTING AGREEMENT: Item No. 2 Mr. B.S. Iyer, 63, is a Post Graduate in Commerce and Law from the University of Bombay, holds a Diploma in Management Accounting, Member of the All India Management Association and is a Fellow Member of the Institute of Company Secretaries of India. Mr. Iyer held senior positions, responsible for Corporate Legal affairs for over 30 years. He retired as Vice President Legal and Company Secretary of Bosch Limited. He is a Corporate Legal Resource person for several MNCs and Indian Companies. He was appointed as a Director of the Company from December 26, 2001. Other Directorships, Committee Memberships/Chairmanships: ZF Steering Gear (India) Limited, Alternate Director Chairman of Audit Committee: 3M India Limited Member of Shareholders Grievance Committee: 3M India Limited Member of the Institutional Ethics Committee (Human Studies), Institute for Stem Cell Biology and Regenerative Medicine, Bangalore Member of the Institutional Ethics Committee (Human Studies), National Centre for Biological Sciences, Bangalore He holds 20 shares jointly as a second shareholder with his wife. Item No. 3 Mr. B.C. Prabhakar, 70, has been on our Board since December 11, 2006. He has been a practicing lawyer since April 1970 and Management Consultant on Labour Laws and Service matters. He is the President of Karnataka Employers Association, which is the leading and oldest Employers Association in the State of Karnataka. He is an employers Nominee of Employees State Insurance Corporation, New Delhi. He has attended Indian Labour Conference for the past ten years which is the highest Tripartite Forum consisting of Representatives of Employers, workers and Government. He holds a B.A in Political Science & Sociology and a B.L from Mysore University. Other Directorships, Committee Memberships/Chairmanships: Wipro Limited, Director Automotive Axles Limited, Director Page Industries Limited, Director Chairmanship of Board Committees -Shareholders -Grievance Committee

Name of the Company 3M India Limited WIPRO Limited Automotive Axles Limited He holds 20 shares in the Company. Item No. 5

Memberships of Board Committees Audit Committee, Shareholders Grievance Committee Audit Committee Audit Committee

Mr. Frank Little, 52, joined 3M Company in 2002 as Executive Director, Research and Development, Corporate Technology and Electro & Communication Markets. He has held several executive positions within 3M. From 2005 to 2008, he was appointed Vice-President and General Manager, Electronic Solutions Division, and from 2008-2011 he was appointed President and Managing Director of 3M Korea, where he was also the Chairman of the American Chamber of Commerce in Korea (AMCHAM). His current role is as Vice-

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3M India Limited
NOTICE TO THE MEMBERS
President and General Manager of 3Ms Personal Safety Division, based out of the Company headquarters in St Paul, MN, USA. He holds a MBA degree from Georgia State University and an Engineering Degree from the University of Illinois. Prior to joining 3M, Frank was Vice-President and General Manager, Photonic Components Division, Corning Inc.; He has also worked in ADC Telecommunications as the Vice President and General Manager for their Analog Transport Division. He was appointed as a NonExecutive Director of the Company from October 26, 2012. Other Directorships, Committee Memberships/Chairmanships: Nil He does not hold any shares in the Company. Item No. 6 Mr. John Houle, 52, joined 3M Company in 1986 as a Structural Engineer in Facilities Engineering Division. He holds a Masters Degree in Civil Engineering from the University of Minnesota. Prior to joining 3M, he worked for Exxon Production Research and with AmHoist. He is a Executive Committee Member, University of Minnesota, Center for Transportation Studies, Board Member of Minnesota Safety Council. He is also associated with American Road and Transportation Builders Association as its Vice Chairman and as a Board Member and Executive Committee member of American Highway Users Alliance. He has held various senior positions in 3M and now he is the Vice President and General Manager for Traffic Safety and Security Division based out of St. Paul, USA. He was appointed as a Non-Executive Director of the Company from October 26, 2012. Other Directorships, Committee Memberships/Chairmanships: Nil He does not hold any shares in the Company. EXPLANATORY STATEMENT AS REQUIRED UNDER SECTION 173 OF THE COMPANIES ACT, 1956. Item No. 5 The Board of Directors at their meeting held on October 26, 2012, appointed Mr. Frank R Little as an Additional Director of the Company with effect from October 26, 2012 pursuant to Section 260 of the Companies Act, 1956. Mr. Frank Little holds office up to the date of this General Meeting. Under Section 257 of the Companies Act, 1956, the Company has received notice from a member signifying his intention to propose the appointment of Mr. Frank Little as a Director. Mr. Frank Little is interested in the resolution at item 5 of the Notice since it relates to his appointment. The Board recommends the resolution for approval of the members. Item 6 The Board of Directors at their meeting held on October 26, 2012, appointed Mr. John R Houle as an Additional Director of the Company with effect from October 26, 2012 pursuant to Section 260 of the Companies Act, 1956. Mr. John Houle holds office up to the date of this General Meeting. Under Section 257 of the Companies Act, 1956, the Company has received notice from a member signifying his intention to propose the appointment of Mr. John Houle as a Director. Mr. John Houle is interested in the resolution at item 6 of the Notice since it relates to his appointment. The Board recommends the resolution for approval of the members. By Order of the Board Place : Bangalore Date : May 30, 2013 V.Srinivasan Company Secretary

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3M India Limited

REPORT OF THE DIRECTORS


To the Members of 3M India Limited
Your Directors have pleasure in presenting to you their 26th Annual Report of the Company with the Audited Accounts for the year ended March 31, 2013. FINANCIAL RESULTS The following are the working results: (Rs. in Lakhs) Particulars For the year ended March 31, 2013 (12 Months) (Audited) 158,463.46 2,204.52 1,050.34 146,362.30 12,101.16 951.35 3,630.00 7,519.81 2,293.28 5,226.53 For the year ended March 31, 2012 (12 Months) (Audited) 141,036.81 2,248.12 526.74 128,404.57 12,632.24 318.05 2,703.13 9,611.06 3,133.89 6,477.17

Total Income Of which - Export Sales - Other Income Less : Expenditure Profit before Interest and Depreciation Less : Interest Less : Depreciation Profit before Taxation Less : Provision for Taxation Profit after Taxation COMPANY PERFORMANCE

The Company registered an overall turnover growth of 12% at Rs. 158,463 Lakhs for the financial year ended March 31, 2013 compared to Rs.141,037 Lakhs in the previous year. The operating margin for the current year was at 7.64% compared to 8.96% for the last year. Net Profit before Tax was at Rs.7,520 Lakhs compared to Rs. 9,611 Lakhs for the previous year. Net profit after taxation was at Rs.5,227 Lakhs compared to Rs.6,477 Lakhs for the previous year. Higher input costs combined with interest, depreciation of the rupee against all currencies and accelerated investments impacted our profit after tax. Export Sales was at Rs.2,205 Lakhs for the year ended March 31, 2013 compared to Rs. 2,248 Lakhs in the previous year. The Industrial and Transportation business grew by 11.66%; Health Care business grew by 21.13%: Display and Graphics business grew by 18.66%; Consumer and Office business grew by 17.71% and Safety, Security and Protection Services business de-grew by 3.05%. The EPS (Basic and Diluted) of the Company for the year 2012-13 was Rs. 46.40 per share as compared to Rs. 57.50 per share in the previous year 2011-12. Detailed analysis of the performance has been discussed in the Managements Discussion and Analysis Section of the Annual Report. CAPITAL INVESTMENTS Capital Investments during the year 2012-13 was at Rs. 12,899 Lakhs (Net of capital work-in-progress and capital advances) (2011-12: Rs. 9,668 Lakhs). RECOGNITION OF NEW R&D CENTER IN BANGALORE Your Directors are pleased to inform you that on July 20, 2012, The Department of Scientific and Industrial Research (DSIR), Government of India has recognized the Companys in-House R&D Unit at Bangalore and on February 7, 2013, approval under section 35(2AB) of the Income Tax Act, 1961 was obtained from DSIR for availing the weighted deduction under Income Tax Act. DIVIDEND In view of the significant investments made in driving our manufacturing and localization initiatives such as non-woven maker, tape coater and on medical plant, it has been decided to conserve and retain our earnings.

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3M India Limited
REPORT OF THE DIRECTORS
DIRECTORS Mr. R. Vijay Kumar ceased to be Whole-time Director of the Company with effect from October 26, 2012. Mr. Frank R Little and Mr. John R Houle were appointed as Additional Directors and Non-Executive Directors from October 26, 2012. The Board of Directors welcomes Mr. Frank R Little and Mr. John R Houle to the Board. Mr. B.S. Iyer and Mr. B.C. Prabhakar are liable to retire by rotation and offer themselves for re-election. REDUCTION IN PROMOTERS SHAREHOLDING IN THE COMPANY In order to comply with Minimum Public Shareholding of 25% as mandated by Securities and Exchange Board of India (SEBI), 3M Company, USA, promoter of the Company sold 113,198 shares through Offer for Sale(OFS) method through Stock Exchanges on March 21, 2013 and brought down its stake from 76% to 75%. CHANGE IN BUSINESS SEGMENTS Consistent with 3Ms global strategy of building relevance and presence in the marketplace, the Company will also align resources and management towards a new revised structure comprised of five business groups: Consumer; Industrial; Health Care; Safety and Graphics; and Energy which will align with 3M Global structures. Presently the Companys operating results were managed on the basis of its existing segment structures viz., Industrial and Transportation, Health Care, Display and Graphics, Consumer and Office and Safety, Security and Protection Services through April 1, 2012 to March 31, 2013, with the intention that results be managed under the new alignment once it is fully effective from April 1, 2013 onwards. MANAGEMENT DISCUSSION AND ANALYSIS A Management Discussion and Analysis Report accompany this report. CORPORATE GOVERNANCE A separate report on Corporate Governance along with a Certificate from a Practising Company Secretary regarding compliance to the Conditions stipulated under Clause 49 of the Listing agreement is set out in the Annexure to the Directors Report. PARTICULARS OF EMPLOYEES The Company had 1,791 employees as of March 31, 2013. During the year, 25 employees employed throughout the year and 1 employee employed for part of the year were in receipt of remuneration of Rs. 60 Lakhs or more per annum / Rs. 5 Lakhs or more per month. In accordance with the provisions of Section 217(2A) read with Companies (Particulars of Employees), Rules, 1975, the names and other particulars of employees are set out in the Annexure to the Directors Report. However, as per the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the Directors Report is being sent to all members of the Company excluding the aforesaid information about the employees. Any Member interested in obtaining such particulars may write to the Company Secretary at the Registered / Corporate Office of the Company and the same shall be provided by the Company. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Information required under Section 217(1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is set out in the Annexure to the Directors Report. SAFETY, HEALTH AND ENVIRONMENT The Company accords high priority to health, safety and environment. The Company has three Manufacturing Plants in operation in India. All these plants are certified ISO 14001: 2004 for their Environmental Management Systems. The initiative of obtaining this certification is in strict adherence to 3M's Environmental Policy. The Company emphasizes maintaining a healthy and safe environment in and around its facilities as well as contract sites where ongoing projects are under execution. Safety awareness is inculcated through regular Safety awareness programs; basic fire safety training, mock drills etc. There has been no incidence of any accidents reported during the year under review. AWARDS AND RECOGNITION The Healthcare Division won the prestigious QCI-DL Shah National Award for Healthcare Services, awarded by the Quality Council of India (QCI) in the Quality Control in Hospital Sterilization category for its significant contribution towards Infection prevention, enabling speedy recovery and positive patient outcomes at reduced healthcare costs. The Electronic City (EC) Plant won second place at the State Level Safety awards announced at the National Safety Day

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REPORT OF THE DIRECTORS


celebrations, organized by the Department of Factories, Boilers, Industrial Safety & Health. The EC plant won second Prize for 5S Excellence from the Confederation of Indian Industry (CII) in the Manufacturing Category (Medium Scale). TESCO presented our Home Care Division with their Winning Together award for supply chain excellence which helped TESCO register a growth of 49% (year-on-year) in Home Care products for the period Jan-Dec 2012. The Company won the MMOG Certification (Materials Management and Operations Guideline) and the Ford Q1 Award, a Global Recognition from Ford for World Class Quality Standards. The MMOG certification is given by the US Automotive Industry Action Group and recognizes our automotive best practices. The Companys work towards establishing the highest quality stand was recognized by General Motors India for Supplier Quality Excellence in 2012. The EC plant consistently supplied on time in full with "Zero DPPM" (defective parts per million) to General Motors for 12 consecutive months. The Companys products - CHG Hand Rub Bottle and Scotch-Brite Kitchen Towels- won the Indiastar 2012 award for excellence in packaging design. Both products have now received recognition at the Asia Regional level by winning the Asia Star Awards for Packaging. The Healthcare division was declared The Wound Management Company of the Year by renowned research company, Frost & Sullivan at their 4th Annual India Healthcare Excellence Awards after being selected and evaluated on the basis of various criteria ranging from revenue generation and market share to technological innovation and clinical excellence, among others. The efforts undertaken by the division in training the nursing fraternity that has in turn considerably raised the standards of care in wound management, has been instrumental in helping the company earn this recognition.

MATERIAL CHANGES AND COMMITMENTS There were no material changes and commitments that occurred affecting the financial position of the Company between March 31, 2013 and the date on which this report has been signed. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 with respect to the Directors Responsibility Statement, the whole-time management state that: i) in the preparation of the annual accounts for the year ended March 31, 2013, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company and of its profits for the year ended March 31,2013; iii) they have taken proper and sufficient care towards the maintenance of adequate accounting records in accordance with the provisions of this Act, to safeguard the Assets of the Company and to prevent and detect fraud and other irregularities; iv) they have prepared the financial statements for the year ended March 31,2013 on a going concern basis; COST AUDIT The Cost Audit Branch, Ministry of Corporate Affairs, Government of India has issued order No. F. No. 52/26/CAB-2010 dated November 6, 2012 to have the cost accounting records audited by a Cost Accountant or a firm of Cost Accountants effective April 1, 2013 for the Companies: a. which are engaged in the production, processing, manufacturing or mining of the products/activities included in the product/ activity groups, b. wherein the aggregate value of the turnover made by the company from sale or supply of all its products/activities during the immediately preceding financial year exceeds Rs. 100 crores, c. wherein the companys equity or debt securities are listed or are in the process of listing on any stock exchange, whether in India or outside India. The following Company product/s mentioned as per Table-II of the above order (i.e., based on central excise tariff Act chapter headings covered in the product or activity group) are covered under the compulsory cost audit, viz.,

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3M India Limited
REPORT OF THE DIRECTORS
Product or activity group code 2013 2014 2023 2025 2028 2029 2030 2035 2036 3009 3010 3024 3027 3036 4008 4017 4020 4048 Name of the product or activity group Albuminoidal substances, starches, glues and enzymes Miscellaneous chemical products paints and varnishes plasters and fillers soaps, detergents and cleaning agents lubricating preparations waxes and wax products chemicals-plastics and polymers articles of plastics and polymers paper and paperboard articles of paper and paperboard synthetic yearns or fibers other textile fabrics or products articles of stones, plaster, cement, asbestos and mica aluminum and aluminum products machinery and mechanical appliances electrical and electronic equipments or appliances miscellaneous manufactured articles Central Excise Tariff Act chapter headings covered in the product or activity group 3506 3811, 3814, 3824 3208 3214 3402 3403 3405 3901, 3904, 3907, 3910 3919, 3920, 3926 4811 4820, 4821, 4823 5601, 5602,5603 6307 6805 7607 8466 8528 9603

Accordingly, the Board of Directors at its meeting on May 30, 2013 had on the recommendation of the audit committee of Directors appointed M/s. Rao, Murthy & Associates, Cost Accountants, Bangalore as Cost Auditors to conduct audit of cost accounting records maintained by the Company for the products covered under MCA cost Audit Order ref. no. 52/26/CAB-2010 dated 06.11.2012, for the financial year ending March 31, 2014. AUDITORS M/s. Lovelock & Lewes, Chartered Accountants, Auditors of the Company, holding Firm Registration No. 301056E will retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. The Company has received a certificate from the Auditors to the effect that their re-appointment, if made, would be in accordance with Section 224(1B) of the Companies Act, 1956. FIXED DEPOSITS During the year under review, the Company has neither accepted nor renewed any deposits from public within the meaning of Sections 58A and 58AA of the Companies Act, 1956 read with the Companies (Acceptance of Deposits) Rules, 1975. ACKNOWLEDGEMENT The Board wishes to place on record its appreciation to all employees in the Company, for their sustained efforts and immense contributions to the good levels of performance and growth that your Company has achieved during the year. The Board also acknowledges the continued support and co-operation received from 3M Company, USA. The Directors express their gratitude to the Central Government and the State Governments of Karnataka, Maharashtra and Gujarat for the support given to the Company. The Directors also thank all customers, dealers, suppliers, banks, members and others connected with the business of the Company for their co-operation. On behalf of the Board of Directors

Place : Bangalore Date : May 30, 2013

Ajay Nanavati Managing Director

Sadhana Kaul Whole-time Director

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ANNEXURE TO THE DIRECTORS REPORT


[Particulars required under Section 217(1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988]. 1. CONSERVATION OF ENERGY The Companys Plant Engineering team periodically reviews and monitors energy consumption and significant savings have been made during the previous year under review through small team activities and improved productivity. 2. A. TECHNOLOGY ABSORPTION AND RESEARCH & DEVELOPMENT RESEARCH & DEVELOPMENT 1. Specific areas in which Research & Development were carried out by the Company Industrial and Transportation Business: - Pressure sensitive adhesives development for tape and label products. - Liquid adhesives for various industrial needs. - Polymer based additive development for films. - Protective coatings and materials for car body applications. - Non woven material development for acoustic insulation applications. - Development of liquid formulations for aftermarket applications. Health Care Business: - Liquid formulations for Infection prevention range of products. - Advanced wound care and dressing products. Safety, Security and Protection Services Business: - Coatings for external corrosion protection and internal coating of pipelines. - Personal protection systems for industrial usage such as eyewear, helmets etc. Consumer and Office Business: - Floor, kitchen & bathroom cleaning solutions - wipes, scrubbers, mops, and cleaning tools. Display and Graphics Business: - Processing and development of polymer products and weatherable materials for Traffic safety products. - Design and development capabilities for molded plastic products for road furniture. - Design, development and commercialization of signage systems for the India market. 2. Benefits derived as a result of the above Research & Development - New products and applications developed to serve specific needs of the Indian market. - New technologies developed relevant to Indian market needs to aid product development. - Improved system cost solutions for our customers and end users. - Supporting growth of business through solutions for Indian customers. - Build capabilities in technology and product development to serve the needs of Indian customers. - Development of products specific for Indian market, especially in the areas of Corrosion Protection, Automotive, Adhesives and Tapes, Abrasive products for industrial and consumer markets, healthcare products, traffic and personal safety, graphics and Electrical and electronics markets. - Further localization of manufacturing of products to meet Indian market needs.

3. Future plan of action

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3M India Limited ANNEXURE TO THE DIRECTORS REPORT


4. Expenditure on Research & Development a) Capital b) Revenue c) Total d) Total Research & Development expenditure as a percentage of total turnover (Rs.in Lakhs) 348.30 3,425.33 3,773.63 2.38%

B. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION 1. Efforts made : Company is focused on innovating in the local market. The Company's technical team has been continuously working on adoption and modification of certain parent company products for local market requirements and redesigning products to create new market opportunities. The technical team is also focused on developing products that meet the needs of the Indian customers. Technology development capabilities relevant to local market needs are being developed in the R&D center to support long term growth. Technology absorption from the parent company continues. Internal practices and procedures are in place for adoption of new technologies. 2. Benefits derived: New products have been introduced in several market segments such as: Industrial and Transportation business, Health Care business, Safety, Security and Protection services business, Display & Graphics and Consumer business. Several products which were launched used the technical knowledge and expertise in the India laboratory while leveraging global knowledge base in 3M helped to create intellectual property protection for the Company. Several local and global patents were filed from technology developed in India. The focus on local market innovation also led to creation of unique technical skills and laboratory capabilities relevant to the market. 3. Technology imported during the last 5 years : Technologies and knowhow from parent company include those in the areas of pressure sensitive adhesives and coatings, corrosion protection coatings, automotive products, healthcare products, especially in the area of infection prevention, and nonwovens for consumer and industrial needs. No technology was imported from other companies other than from parent company. The Company had entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. These payments have been reinstated with effect from July 1, 2009, accordingly the Company has incurred an expenditure of Rs.1,051.96 Lakhs for the financial year 2012-13 (PY: Rs.1,195.72 Lakhs). 3. FOREIGN EXCHANGE EARNINGS AND OUTGO 1. Activities relative to exports; initiatives taken to increase exports; development of new export markets for products and services; export plans: Continuous focus, strategies, increased sourcing of products and services from 3M India by the 3M group Companies will increase export of products and services. The Company had entered into a contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the period under review, Company received an amount of Rs. 1,725.45 Lakhs (PY: Rs. 1,410.92 Lakhs) for contract research and Rs. 702.98 Lakhs (PY: Rs. 696.44 Lakhs) for support Services /Corporate Management Fees. 2. Foreign exchange earnings and outgo: During the period under review, Foreign Exchange earnings were Rs. 4,535.31 Lakhs (PY: Rs. 4,364.83 Lakhs) and Foreign Exchange outgo was Rs. 78,941.44 Lakhs (PY: Rs. 68,149.26 Lakhs).

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MANAGEMENT DISCUSSION AND ANALYSIS REPORT


Cautionary Statement: Investors are cautioned that the discussion in this section of the Annual Report may contain statements that involve risks and uncertainties. Forward-looking statements mentioned may involve risks and uncertainties that could cause results to differ materially from those projected. Consequently, actual results, performance or achievements could thus differ materially from those projected in any such forward looking statements. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no obligation to update or revise any forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events and trends that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those reflected in any such forward-looking statements depending on a variety of factors.
ABOUT 3M INDIA LIMITED 3M India Limited is a subsidiary of 3M Company, USA and is a diversified technology company with a global presence in the following businesses: Industrial and Transportation; Health Care; Consumer and Office; Safety, Security and Protection Services; and Display and Graphics. It is among the leading manufacturers of products for many of the markets it serves. Most of its products involve expertise in product development, manufacturing and marketing, and are subject to competition from products manufactured and sold by other technologically oriented companies. In India, the company has manufacturing facilities at Ahmedabad, Bangalore, Pune and has a R&D Center in Bangalore. As at March 31, 2013, the Company employed 1,791 people. For the year 2012-13, the Company managed its operations in five operating business segments: Industrial and Transportation; Health Care; Display and Graphics; Consumer and Office and Safety, Security and Protection Services. 3M Indias five business segments bring together common or related 3M technologies that enhance the development of innovative products and services and provide efficient sharing of business resources. These segments have worldwide responsibility for virtually all 3M product lines. 3M products are sold through numerous distribution channels, including directly to users and through numerous wholesalers, retailers, converters, distributors and dealers in a wide variety of trades in many countries around the world. The Management of the Company believes that the confidence of wholesalers, retailers, converters, distributors and dealers in 3M and its products a confidence developed through long association with skilled marketing and sales representatives has contributed significantly to 3M India's growth and its position in the marketplace. Consistent with 3Ms global strategy of building relevance and presence in the marketplace, the Company will also align resources and management towards a new revised structure comprised of five business groups: Consumer; Industrial; Health Care; Safety and Graphics; and Energy from April 1, 2013 which will align with 3M Global structures. GLOBAL ECONOMIC OVERVIEW Global prospects have improved but the road to recovery in the advanced economies will remain rough. World output growth is forecast to reach 3 percent in 2013 and 4 percent in 2014. In the major advanced economies, activity is expected to gradually accelerate, following a weak start to 2013, with the United States in the lead. In emerging market and developing economies, activity has already picked up steam. Advanced economy policymakers have successfully defused two of the biggest threats to the global recovery, a breakup of the euro area and a sharp fiscal contraction in the United States caused by a plunge off the fiscal cliff. In the short term, risks mainly relate to developments in the euro area, including uncertainty about the fallout from events in Cyprus and politics in Italy as well as vulnerabilities in the periphery. In the medium term, the key risks relate to adjustment fatigue, insufficient institutional reform, and prolonged stagnation in the euro area as well as high fiscal deficits and debt in the United States and Japan. In advanced economies, the right macroeconomic approach continues to be gradual but sustained fiscal adjustment, built on measures that limit damage to activity and accommodative monetary policy aimed at supporting internal demand. The euro area needs to strengthen the Economic and Monetary Union (EMU). In emerging market and developing economies, some tightening of policies appears appropriate in the medium term. INDIA ECONOMIC OVERVIEW Slowdown in Indian economy has to be seen in the context of slowing global economic growth from 3.9% in 2011 to 3.2% in 2012. While India's recent slowdown is partly rooted in external causes, domestic causes are also important. However, the boost to consumption, coupled with supply-side constraints, led to higher inflation. Monetary policy was tightened, even as external headwinds to growth increased. Falling savings without a commensurate fall in aggregate investment have led to a widening current account deficit (CAD). Wholesale price index (WPI) inflation has been coming down in recent months. The food inflation, after a brief slowdown, continues to be higher than overall inflation. Given the higher weightage to food in consumer price indices (CPI), CPI inflation has remained close to double digits. Another consequence of the slowdown has been lower-than-

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3M India Limited
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
targeted tax and non-tax revenues. With the subsidies bill, particularly that of petroleum products, increasing, the danger that fiscal targets would be breached substantially became very real in the current year. The situation warranted urgent steps to reduce government spending so as to contain inflation. Also required were steps to facilitate corporate and infrastructure investment so as to ease supply. Several measures announced in recent months are aimed at restoring the fiscal health of the government and shrinking the CAD as also improving the growth rate. The need of the situation is that, India, now will have to revive growth, and that growth has to provide more jobs for the many millions who will join the labor force, even while reducing poverty. Second, India needs to shift from consumption to investment, i.e., increase our savings especially government savings and household financial savings, even as we also increase corporate and infrastructure investment. Third, India needs macroeconomic stabilization i.e., to bring down inflation, the fiscal deficit and the current account deficit. The World Economic Outlook predicts Growth will rise in India to 5 percent in 2013 as a result of improved external demand and recently implemented pro-growth measures. Significant structural challenges will likely lower potential output over the medium term and also keep inflation elevated by regional standards. INDIAN INDUSTRYS PERFORMANCE After recovering to a growth of 9.2% in 2009-10 and 2010-11, growth of value added in industrial sector, comprising manufacturing, mining, electricity and construction sectors, slowed to 3.5% in 2011-12 and to 3.1% in the current year. The manufacturing sector, the most dominant sector within industry, also witnessed a decline in growth to 2.7% in 2011-12 and 1.9% in 2012-13 compared to 11.3% and 9.7% in 2009-10 and 2010-11, respectively. The growth in electricity sector in 2012-13 has also moderated. The growth of the mining sector in 2012-13 is estimated at 0.4%, though it showed an improvement over a negative growth of 0.63% recorded in 201112. With improved business sentiments and investor perception and a partial rebound in industrial activity in other developing countries, industrial growth is expected to improve in the next financial year. RESULTS OF THE OPERATIONS OF THE COMPANY The Company registered an overall turnover growth of 12% at Rs. 158,463 Lakhs for the financial year ended March 31, 2013 compared to Rs.141,037 Lakhs in the previous year. The operating margin for the current year was at 7.64% compared to 8.96% for the last year. Net Profit before Tax was at Rs.7,520 Lakhs compared to Rs. 9,611 Lakhs for the previous year. Net profit after taxation was at Rs.5,227 Lakhs compared to Rs.6,477 Lakhs for the previous year. Higher input costs, combined with depreciation of the rupee against all currencies (as compared to March 31, 2012 rates of all currencies) at Rs. 4,683 Lakhs, interest costs at Rs. 951 Lakhs and accelerated investments impacted our profit after tax. Export Sales was at Rs. 2,205 Lakhs compared to Rs. 2,248 Lakhs. Other Operating Income: The other income was at Rs. 1,050 Lakhs for the year 2012-13 when compared to Rs. 527 Lakhs for the previous year 2011-12. Cost of Goods sold: The % of cost of raw material consumed as against sales for the year 2012-13 has gone up to 63.14% as against 61.75% for the previous year 2011-12 mainly on higher input costs, combined with depreciation of the rupee against all currencies. Employee Benefits Expense: Employee cost as a % of sales for the year 2012-13 stood at 13.52% (previous year 13.16%) at Rs. 21,282 Lakhs (previous year : Rs. 18,566 Lakhs), higher by 2.35% . Sales per employee have improved by 3.96% to Rs. 87.89 Lakhs (no. of employees 1,791) in the current year 2012-13 from Rs. 84.54 Lakhs (no. of employees 1,662) for the previous year 2011-12. Depreciation: The depreciation charge for the current year is higher at Rs. 3,630 Lakhs as against a charge of Rs. 2,703 Lakhs of previous year 2011-12 due to additional capital investment during the year 2012-13 at Ranjangaon Plant. Finance Cost: The interest cost for the year 2012-13 was at Rs.951 Lakhs compared to Rs. 318 Lakhs in the previous year 2011-12. The increase is mainly on account of increase in borrowings for working capital and capital expenditure. Earnings per Share (EPS): The EPS (Basic and Diluted) of the Company for the year 2012-13 was Rs. 46.40 per share as compared to Rs. 57.50 per share in the previous year 2011-12.

25

MANAGEMENT DISCUSSION AND ANALYSIS REPORT


Share Capital: The Company has only one class of share, i.e. equity share with a face value of Rs. 10 each. The Authorized/Issued/Subscribed and fully paid-up Capital as at March 31, 2013 was Rs. 11,26,50,700 (divided into 1,12,65,070 equity shares of Rs. 10 each). Reserves & Surplus: Entire profit of Rs. 5,227 Lakhs is retained in profit and loss account for the year ended March 31, 2013. The Reserves & Surplus was at Rs. 65,644 Lakhs including the current year retained profit. Shareholders Fund: The total shareholder funds increased to Rs. 65,644 Lakhs as at March 31, 2013 from Rs. 60,417 Lakhs as of the previous financial year 2011-12 end, representing a growth of 8.65% mainly on account of retained profits of the current year. Fixed Assets-Capital Expenditure: The gross Fixed Assets as at March 31, 2013 was Rs.43,893 Lakhs as compared to Rs. 39,450 Lakhs of previous financial year 201112.The Company has incurred a capital expenditure of Rs. 12,899 Lakhs (Net of capital work-in progress and capital advances) during the year 2012-13 (previous year : Rs. 9,668 Lakhs) , a increase of 33.42% year on year. Inventories: Inventory as at March 31, 2013 amounted to Rs. 22,521 Lakhs as against Rs. 21,372 Lakhs of previous financial year 2011-12.The inventory ratio has decreased to 83 days as at March 31, 2013 from 90 days of previous year 2011-12. Trade Receivables: Trade Receivables as at March 31, 2013 amounted to Rs.26,637 Lakhs as against Rs. 23,311 Lakhs of previous year 2011-12. The debtors turnover ratio was at 62 days (previous year: 61 days). Cash and Bank balances: The total balance of cash and bank balances as at March 31, 2013 was Rs. 5,958 Lakhs as compared to Rs. 5,389 Lakhs for the previous year 2011-12. Overall analysis of the financial statements: Particulars Revenue(Net) Other income Total Revenue Cost of Materials consumed Purchases of stock-in-trade Changes in inventories of finished goods, work-in-progress and stock-in-trade Employee Costs Other Expenses Profit before Finance Costs and Depreciation Finance Costs Depreciation Total Expenditure Profit before Tax Tax Profit After Tax Segment wise performance: The Industrial and Transportation business grew by 11.66%; Health Care business grew by 21.13%: Display and Graphics business grew by 18.66%; Consumer and Office business grew by 17.71% and Safety, Security and Protection Services business de-grew by 3.05%. Year Ended March 31, 2013 Rs. in Lakhs 157,413.12 1,050.34 158,463.46 61,661.73 38,134.60 (406.78) 21,282.17 25,690.58 12,101.16 951.35 3,630.00 150,943.65 7,519.81 2,293.28 5,226.53 % 99.33 0.67 100.00 38.91 24.06 (0.25) 13.43 16.21 7.64 0.60 2.29 95.25 4.74 1.44 3.31 Year Ended March 31, 2012 Rs. in Lakhs 140,510.07 526.74 141,036.81 51,355.92 41,389.05 (5,974.97) 18,566.27 23,068.30 12,632.24 318.05 2,703.13 131,425.75 9,611.06 3,133.89 6,477.17 % 99.63 0.37 100.00 36.41 29.35 (4.24) 13.16 16.36 8.96 0.23 1.92 93.19 6.81 2.22 4.59

26

3M India Limited
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
(A) INDUSTRIAL AND TRANSPORTATION BUSINESS: The Industrial and Transportation Business Segment serves a broad range of markets, such as general industry, appliances, paper and packaging, food and beverage, electronics, automotive Original Equipment Manufacturer (OEM), automotive aftermarket (auto repair shops, Service shops, auto care and retail) to name a few. Our Industrial and Transportation business has products that include tapes, a wide variety of coated and non-woven abrasives, adhesives, specialty materials, compounds and polishes , components and products that are used in the manufacture, repair and maintenance of automotive, marine, aircraft and specialty vehicles. Major products under this segment include vinyl, polyester, foil and specialty industrial tapes and adhesives: Scotch Masking Tape, Scotch Filament Tape and Scotch Packaging Tape; Functional and Decorative Graphics; Abrasion-Resistant Films, Masking Tapes and Other Specialty Materials under 3M , Scotch , Meguair and Bondo Brand . The newest foray is in service business thru 3M Car Care Centers. Rs. in Lakhs 12 Months Ended 31.03.13 Financial Highlights Segment Revenue Profit before Interest & Tax Capital Employed 77,179.01 5,507.94 39,133.60 12 Months Ended 31.03.12 69,120.11 5,717.41 29,415.60

Highlights

Slow down in Industrial growth in the country and in manufacturing, specifically slowest growth in Auto sector in the past one decade had an impact of reducing the growth rate of the business. Devaluation of the Indian rupee vis-a -vis foreign currencies like the US Dollar and Euro had the effect of increasing the cost of imported raw material and finished goods. While the business responded with aggressive price increases, the whole impact of cost increase was not neutralized. The success of the 3M Car Care Center initiative helped in enhancing visibility for the 3M brand and opened up a potentially new high growth business opportunity.

(B) HEALTH CARE BUSINESS Our Health Care business segment serves markets that include large multi-specialty hospitals and small clinics, dental and orthodontic practitioners, processed food manufacturers and pharmaceutical companies. Our offerings include medical and surgical supplies, medical devices, skin & wound care and infection prevention products & solutions, drug delivery systems, dental and orthodontic products and food safety products. Rs. in Lakhs 12 Months Ended 31.03.13 Financial Highlights Segment Revenue Profit before Interest & Tax Capital Employed 22,147.86 1,150.95 7,220.65 12 Months Ended 31.03.12 18,283.91 1,117.69 4,650.90

Highlights

The Healthcare Business received many awards including the Prestigious DL Shah National Award from Quality Council of India in March 2013. The Award recognizes 3M Healthcares success in "Taming Infection through Quality Control in Hospital Sterilization. 3M Healthcare was also awarded Wound Management Company of the Year in the Frost & Sullivan 4th Annual Health Excellence awards in 2012. A Healthcare Manufacturing facility is being set up in Ranjangaon with a capability to manufacture expanded range of medical products. 3M Healthcare continued focus on strong customer relationships and launched a number of customer education initiatives. Several new products were launched which created significant impact in the market and ensured continued leadership. State-of-the-art lingual orthodontics system (Incognito TM) was launched in India further enhancing our brand image in this business. Food Safety business has made breakthroughs in several major accounts in the Diary, Beverage and other Food processing Industry.

27

MANAGEMENT DISCUSSION AND ANALYSIS REPORT


(C) SAFETY, SECURITY AND PROTECTION SERVICES BUSINESS : Safety, Security and Protection Services business segment serves a broad range of markets that increase the safety, security & protection of workers, facilities and systems. Major product offerings include personal protection products, brand & asset protection solutions, border control products, passive fire protection products for industries and commercial establishments, track and trace products, cleaning and hygiene products for the hospitality industry. Rs. in Lakhs 12 Months Ended 31.03.13 Financial Highlights Segment Revenue Profit before Interest & Tax Capital Employed 19,407.29 309.01 11,442.90 12 Months Ended 31.03.12 20,017.90 1,259.06 11,133.74

Highlights

Increasing trend in adoption of Safety and Security practices by organization saw increase in interest and demand for personal protection, brand and asset protection, border control, and passive fire protection products. Growth in IT, ITES and Hospitality Sector has ensured good demand for cleaning and hygiene products. Considerable efforts have gone in to develop business with our innovative products in new segments like Water Authority, Hospitals, Railways and Defense sector. We foresee sizeable business in coming years. Business Growth from Infrastructure, Oil and Gas Pipeline sector has been modest because of delays.

(D) CONSUMER AND OFFICE BUSINESS: The company focused on increasing its franchise with the retail consumers, by increasing the availability of its products across more geographies, as well as with new product introductions. There was continued brand investment in Home Care business for the Scotch-Brite brand & increased spends on TV, as well as in digital space. Targeting the student market for the Scotch range of Tapes & Adhesives, based on Dikhao Apna Magic to foster creativity amongst schools students was very well received. The extension of brand Scotchgard, in providing protection for furnishings & upholstery into new metros was a success. Rs. in Lakhs 12 Months Ended 31.03.13 Financial Highlights Segment Revenue Profit before Interest & Tax Capital Employed 14,427.07 (544.56) 4,425.68 12 Months Ended 31.03.12 12,256.96 (396.05) 2,794.60

Highlights

With activation programs across Modern Trade Chains, the Scotch-Brite brand has been able to gain high category share & has successfully been able to gain leadership in the Household cleaning tools market of - Utensil care, Floor Care, Wiping & other handled tools. This was supported with above the line marketing campaigns during the course of the year, to establish the brand in Floor & handled tools category across channels. Integrated Marketing Campaign on Trendy Wipes, with a contest of Design Your Own Wipe received a great response across the key metro markets. The Post-it brand, with the repositionable notes is now being adopted by the students, who find this as a great organizational tool, as well as a handy study tool. The unique color changing, Purple Glue stick from the Scotch portfolio has become a leader in its category, with the students community. Along with the Do-it-yourself cans from Scotchgard, the extension of services of protecting the upholstery in the home market, is gaining good acceptance. Manufacturing facility is being set up at Ranjangaon to manufacture many products.

28

3M India Limited
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
(E) DISPLAY AND GRAPHICS BUSINESS Display & Graphics Business is an amalgamation of four divisional subsets- the Traffic Safety Systems Division (TSSD), the Commercial Graphics Division (CGD), the Architectural Markets Division (AMD) and the Mobile Interactive Solutions Division (MISD). TSSD offers a host of road safety services and motor vehicle safety solutions. The offerings include retro reflective traffic signs for highways and cities, pavement marking and vehicle registration products and services. CGD portfolio includes products like films, inks and digital signage products which help create static and dynamic graphics for retail signs, buildings, vehicles, commercial-space exteriors and interiors as also a multi-segment brand-owner focus service offering. AMD offers wall and glass cladding products coupled with architectural interior services and environmental graphics for home and office spaces. MISD caters to the electronic displays market addressing the needs for projection systems, computer and ATM-screen privacy filters and brightness enhancement films for television, avionics and automotive displays. Rs. in Lakhs 12 Months Ended 31.03.13 Financial Highlights Segment Revenue Profit before Interest & Tax Capital Employed 21,960.42 662.82 4,032.75 12 Months Ended 31.03.12 18,507.52 1,337.60 4,261.77

Highlights

The Traffic Safety Systems (TSS) Division successfully completed several turnkey traffic signage projects like for Large Infrastructure Projects like Jaypees Yamuna Expressway and L & Ts Highway Projects in Gujarat. TSS has established a Leading position in the Conspicuity Tapes Market for Vehicle Market both OEM and After-Market. Commercial Graphics Division has executed: a Turnkey Interior Graphics program for Axis Bank Branches covering 1400 Branches and 7500 ATMs; a brand identity change program for MaxLife Insurance in over 135 Branches and; a BTL visibility campaign for Shell across 7500 Dealer Outlets. Commercial Graphics Division has bagged an order for Exterior Signage and Interior Graphics and related branding work for over 100 Dealerships of Ashok Leyland Heavy Vehicles. Commercial Graphics Division has also started rolling out a Digital Menu Board Network for Dominos Pizza and Dunkn Donuts covering more than 75 outlets. The Architectural Markets (AMD) Division has built a solid channel foundation with a network of Pan-India Distributors and their products have found applications in the IT/ITES space.

The following are some of the risk mitigation plants by the Company : Currency volatility - continue to drive localization and aggressively adjust prices to off-set. Cost escalation - use Lean Six Sigma projects for cost reduction. Productivity - optimize deployment of resources to maximize coverage and penetration. Success of new product launches - continue the existing disciplined New Product Introduction (NPI) gate process to filter programs. Timely new plant start-ups - pro-actively allocate appropriate technical resources to ensure no delays. Sustained industry slowdown - continue strong cost controls and manage resources effectively.

OPPORTUNITIES AND THREATS 3Ms globally competitive cost positions and well crafted business strategies have enabled it to retain its leading market positions. Your Company strongly believes in the 3M brand equity and its ability to provide its customers with innovative solutions. The company is operating in a highly competitive market which may exert pressure both on the top line as well as the bottom line of the company. As the Companys products involve expertise in product development, manufacturing and marketing, are subject to competition from products manufactured and sold by other technologically oriented companies both within India and outside India. In addition, Inflation, rupee depreciation, high commodity prices and hardening interest rates remain key challenges needing focused attention.

29

MANAGEMENT DISCUSSION AND ANALYSIS REPORT


RISKS AND CONCERNS Provided below are cautionary statements of what we believe to be the most important risk factors applicable to the Company. The impact of increase in duties on the products of the Company and consequent increase in the cost of goods sold. The Company's results are affected by competitive conditions and customer preferences. The Company's growth objectives are largely dependent on the timing and market acceptance of its new product offerings, including its ability to continually renew its pipeline of new products and to bring those products to market. Prices of inputs are expected to rise significantly. Whilst the Company continues to pursue cost reduction initiatives, increase in price of input materials and rupee depreciation could impact the Companys profitability to the extent that the same are not absorbed by the market through price increases and/or could have a negative impact on the demand in the domestic market. The operations are subject to risk arising from fluctuations in exchange rates with reference to currencies in which the company transacts. These risks primarily relate to fluctuations of USD and EUR to INR. The Company's future results may be affected if the Company generates fewer productivity improvements than estimated. The outcome of contingencies, such as legal and regulatory proceedings. The effects of changes in tax, and other laws and regulations.

OUTLOOK Most countries are facing challenges in growth and unemployment as still global economy is in an uncertain phase. We expect Indias projected GDP for 2013-14 to grow better than 2012-13 as the recent policy initiatives / reforms by the Government should help to boost sentiment /investment climate. Reviving demand, increase industrial production, improving power generation and fast track infrastructure projects will be the major challenges for the Indian economy. Increased per capita income, increased liquid fund in market, higher discretionary spending, growing aspirations of the Indian middle class, growth of retail credit are the other key drivers of the economy this year. The Company expects the sales growth and related incremental income, in addition to expected productivity improvements, selling price increases in excess of raw material, inflation, and other benefits, should help offset the items that will negatively impact earnings. This expected sales growth and related incremental operating income is considered after taking into account factors such as; price increase initiatives, increase in productivity, sustained investments in Infrastructure by the State and Central Governments with more focus on urban transportation, major highway projects and focus on health care etc.,. Your Company will continue to focus on its localization efforts, innovative R&D, development of new customer segments and expansion of current market segments to secure competitive growth. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY All key functions and divisions of the Company are independently responsible to monitor risks associated within their respective areas of operations such as production, supply chain, marketing, treasury, legal and others areas like health, safety and environment. Your Company has identified various risks and procedures to mitigate the same. Your Company has in place adequate systems of internal control commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use or losses, executing transactions with proper authorization and ensuring compliance of corporate policies. The Company, through its own Corporate Internal Audit Department, carries out periodic audits to cover all the offices, factories and key areas of business segments based on the plan approved by the Audit Committee and bring out any deviation to internal control procedures. The Internal Auditor functionality reports to the Audit Committee and administratively to the Managing Director. The observations arising out of audit are periodically reviewed and compliance ensured. The summary of the Internal Audit observations and status of the implementation is submitted to the Audit Committee of the Board of Directors. The status of implementation of the recommendations is reviewed by the Committee on a regular basis and concerns, if any, are reported to the Board.

30

3M India Limited
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS Your Company continues to believe that it is highly critical to have employees who are competent, engaged and take ownership in order for 3M India to realize its goals. In keeping with this philosophy, to build competent employees, your Company has continued to invest in providing career opportunities, training and development. The emphasis and communication to employees has been on career broadening experiences through a lattice growth in order to ensure that employees optimize the breadth and variety of 3M's various businesses. This has also resulted in maximum movements during this period. Your company has started focusing on long term Human Resource planning aimed at resourcing high growth divisions on a priority, managing change more efficiently, grooming internal talent for future roles and also driving operational excellence within the organization. Your company has outsourced the non core HR activities to build scale and efficiency. This has resulted in a much more focused and effective 'On boarding' process to ensure the smooth settling in of new employees/ supervisors into the company through the induction and orientation program. There has also been a constant endeavor to continuously revamp these programs taking into consideration the diversity in terms of gender, regional and generations. Your Company identifies employees who could grow faster (high potential) and supports them through varied learning and development initiatives. The Individual Development programs (IDP) has brought greater focus through a 70:20:10 plan. Several programs and projects have enabled the high potentials realize their potential, broaden their learning perspectives and ensure faster growth. Your Company has been continuously focusing on people and processes to encourage and realize their full potential. In that direction this year saw a launch of several Communication initiatives including a quarterly newsletter 'Hruday'. A cross functional project team also captured the essence of the spirit of 3M and its culture. Throughout the year under review, many training programs in the areas of leadership, sales and technical skills were conducted for employees. A 3M Leadership Academy will be launched in India which will take leadership development to the next level, and also enable 3M India to become a hub for APAC programs in the future. Employee engagement continued to be the thread to bring together all employees in the organization. Regular internal communications, meetings and events have enhanced the engagement of the employees across various locations/ offices. This has also contributed towards cordial and harmonious relations with employees throughout the year under review. On behalf of the Board of Directors

Place : Bangalore Date : May 30, 2013

Ajay Nanavati Managing Director

Sadhana Kaul Whole-time Director

31

REPORT ON CORPORATE GOVERNANCE


THE COMPANYS GOVERNANCE PHILOSOPHY The Company believes that transparent accounting policies, appropriate disclosure norms, best in class board practices and consistently high standards of corporate conduct towards its stakeholders are essential for sustained corporate growth. The Corporate Governance comprises of a unique combination of factors like regulations, compliance, policies and economic environments, voluntary practices and disclosures. The Management Team and all other employees of the Company maintain a high level of ethical values for achieving business success. BOARD OF DIRECTORS Composition: The Board comprises of Executive and Non-Executive Directors, who are persons of eminence having vast and varied experience and with professional background and experience in Business, Industry, Finance and Law. The Board of Directors of the Company is headed by a Non-Executive and Independent Director. Brief Profile of the Directors of the Company: Mr. D.J. Balaji Rao (DIN-00025254): Mr. D.J. Balaji Rao, 74, holds a B.E Degree in Mechanical Engineering from the University of Madras and Associate member of Indian Institution of Industrial Engineering (AMIIIE). He attended the Advanced Management Program at European Institute of Business Administration (INSEAD) at Fontainebleu, France, in 1990. He pursued his career as an Industrial Engineer for about 8 years before joining erstwhile ICICI Ltd. (since merged with ICICI Bank Ltd) in 1970. After wide ranging responsibilities in different locations, he reached the position of Deputy Managing Director. He subsequently took over as the Vice Chairman and Managing Director of SCICI Ltd. in August 1996. With the merger of SCICI Ltd. with ICICI Ltd. he moved to Infrastructure Development Finance Co. Ltd. (IDFC), as its first Managing Director, which he served till his superannuation in January 2000.He has served on the Boards of many leading companies including Bosch Ltd(formerly MICO Ltd) , Wipro Ltd. and Bharat Forge Ltd., etc. He was appointed as a Director of the Company from December 26, 2001 and as Chairman of the Company from September 10, 2008. Mr. B.S. Iyer (DIN-00138425): Mr. B.S. Iyer, 63, is a Post Graduate in Commerce and Law from the University of Bombay, holds a Diploma in Management Accounting, Member of the All India Management Association and is a Fellow Member of the Institute of Company Secretaries of India. Mr. Iyer held senior positions, responsible for Corporate Legal affairs for over 30 years. He retired as Vice President Legal and Company Secretary of Bosch Limited. He is a Corporate Legal Resource person for several MNCs and Indian Companies. He was appointed as a Director of the Company from December 26, 2001. Mr. B. C. Prabhakar (DIN- 00040052): Mr. B.C. Prabhakar, 70, has been on our Board since December 11, 2006. He has been a practicing lawyer since April 1970 and Management Consultant on Labour Laws and Service matters. He is the President of Karnataka Employers Association, which is the leading and oldest Employers Association in the State of Karnataka. He is an employers Nominee of Employees State Insurance Corporation, New Delhi. He has attended Indian Labour Conference for the past ten years which is the highest Tripartite Forum consisting of Representatives of Employers, workers and Government. He holds a B.A in Political Science & Sociology and a B.L from Mysore University. Mr. Albert C Wang (DIN- 05234667): Mr. Albert Wang, 45, joined 3M Company in January 2012 as General Counsel, Asia Pacific and is based out of Shanghai, China. Prior to joining 3M, Albert was Legal Director for Dell Inc. from 2001-2012 leading their legal affairs efforts for Greater China as well as regionally (Asia Pacific) for their Public & Large Enterprise business unit. He began practicing law with the New York-based international law firm of Coudert Brothers, with postings in Hong Kong (1993-1998) and Shanghai (1998-2001).There, his practice was focused on foreign direct investment and mergers and acquisitions, representing a wide array of multinational corporations and global financial institutions across a broad range of industry sectors. Mr. Albert Wang graduated cum laude in 1990 from Colgate University with a Bachelor of Arts degree in Political Science. He earned his Juris Doctor degree from The George Washington University National Law Center in 1993. He is a member of the New York State Bar, the American Chamber of Commerce in Shanghai and the U.S. China Business Council. He was appointed as a Non-Executive Director of the Company from March 12, 2012. Mr. Frank R Little (DIN- 06395992): Mr. Frank Little, 52, joined 3M Company in 2002 as Executive Director, Research and Development, Corporate Technology and Electro & Communication Markets. He has held several executive positions within 3M. From 2005 to 2008, he was appointed Vice-President and General Manager, Electronic Solutions Division, and from 2008-2011 he was appointed President and Managing Director of 3M Korea, where he was also the Chairman of the American Chamber of Commerce in Korea (AMCHAM). His current role is as Vice-President and General Manager of 3Ms Personal Safety Division, based out of the Company headquarters in St Paul, MN, USA. He holds a MBA degree from Georgia State University and an Engineering Degree from the University of Illinois. Prior to joining 3M, Frank was Vice-President and General Manager, Photonic Components Division, Corning Inc.; He has also worked in ADC Telecommunications as the Vice President and General Manager for their Analog Transport Division. He was appointed as a Non-Executive Director of the Company from October 26, 2012.

32

3M India Limited
REPORT ON CORPORATE GOVERNANCE
Mr.John R Houle (DIN- 06395986): Mr. John Houle, 52, joined 3M Company in 1986 as a Structural Engineer in Facilities Engineering Division. He holds a Masters Degree in Civil Engineering from the University of Minnesota. Prior to joining 3M, he worked for Exxon Production Research and with AmHoist. He is an Executive Committee Member, University of Minnesota, Center for Transportation Studies, Board Member of Minnesota Safety Council. He is also associated with American Road and Transportation Builders Association as its Vice Chairman and as a Board Member and Executive Committee member of American Highway Users Alliance. He has held various senior positions in 3M and now he is the Vice President and General Manager for Traffic Safety and Security Division based out of St. Paul, USA. He was appointed as a Non-Executive Director of the Company from October 26, 2012. Mr. Ajay Nanavati (DIN-02370729): Mr. Ajay Nanavati, 57, holds a Bachelor Degree in Chemical Engineering from USA and has a rich experience in various Industries, spanning over 30 years. He started his professional career in 1977 with Tata Consulting Engineers before joining 3M India Ltd in 1988 as General Manager. He held various senior positions in 3M Company, USA and in other subsidiaries over the last 25 years of his career in 3M Group. He was appointed as Managing Director of the Company from October 01, 2008. Mr. B.V. Shankaranarayana Rao (DIN-00044840): Mr. B.V. Shankaranarayana Rao, 53, holds a Bachelor Degree in Commerce and a Masters Degree in Business Administration from Bangalore University. He has been with the Company since 1990. He has over 30 years of experience in Finance and Corporate Management. He has held various positions during his tenure in 3M India. He has also worked in 3M Asia Pacific, Singapore, prior to heading the Finance Department in 3M India Limited. He was appointed as a Whole-time Director of the Company from July 24, 2002. With effect from October 1, 2012, was appointed as Chief Compliance and Process Officer. Mrs. Sadhana Kaul (DIN- 02589934): Mrs. Sadhana Kaul, 49, joined the Company in 2005 and has over 21 years of experience in the legal field, having worked in different capacities in law firms in the US and in India. She leads the planning, development and execution of strategic legal initiatives whilst managing the legal risks of the Company in India and parts of South East Asia. Prior to joining the Company, she was with GE Medical Systems as Senior Legal Counsel based in Bangalore. She holds a Bachelors Degree in Law from Trinity College Cambridge, UK and a Masters Degree in International and Comparative Law from Georgetown University Law Center, Washington D.C. In addition to her current responsibility as General Counsel of the Company, with effect from October 1, 2011, she also acts as Asia Pacific Area Counsel for the Industrial and Transportation Business. She was appointed as a Whole-time Director of the Company from October 09, 2009. Names of other companies/firms in which Directors of the Company hold/held office as Director/Partner are given below: Mr. D.J. Balaji Rao Bajaj Auto Limited, Director Ashok Leyland Limited, Director Graphite India Limited, Director Hinduja Foundries Limited, Director JSW Energy Limited, Director Bajaj Finserve Limited, Director Bajaj Holdings and Investments Limited, Director Bajaj Finance Limited, Director CMI-FPE Limited, Director Mr. B. S. Iyer ZF Steering Gear (India) Limited, Alternate Director Member, Institutional Ethics Committee (Human Studies) of the Institute of Stem Cell Biology and Regenerative Medicine, Bangalore Member, Institutional Ethics Committee (Human Studies) of National Centre for Biological Sciences, Bangalore Mr. B.C. Prabhakar Wipro Limited, Director Automotive Axles Limited, Director Page Industries Limited, Director

Mr. Albert C Wang Nil Mr. Frank R Little (from October 26, 2012) Nil Mr. John R Houle (from October 26, 2012) Nil

33

REPORT ON CORPORATE GOVERNANCE


Mr. Ajay Nanavati 3M Lanka (Private )Limited, Sri Lanka, Managing Director Mr. B.V. Shankaranarayana Rao 3M Lanka (Private)Limited, Sri Lanka, Director Mrs. Sadhana Kaul 3M Lanka (Private) Limited, Sri Lanka, Director Mr. R. Vijay Kumar (up to October 26, 2012) Nil As on March 31, 2013, the strength of the Board is nine (9), of which three (3) are Whole-time Directors, three (3) are Independent Directors and three (3) Non-Executive Directors. As on March 31, 2013, the composition of the Board is in conformity with Clause 49 (I) (A) (ii) of the Listing Agreement. None of the Directors of the Company are related to each other. Meetings: The meetings of the Board of Directors are normally held at the Companys Corporate Office in Bangalore. Meetings are generally scheduled well in advance and the notice of each Board Meeting is given in writing to each Director. The Board meets at least once a quarter to review the quarterly performance and financial results of the Company. The Board is provided with the relevant information as stipulated in Clause 49 of the Listing Agreement. The Meetings are governed by a structured agenda. The Board papers, agenda and other explanatory notes are circulated to the Directors well in advance. Details of Board Meetings during the financial year: During the financial year April 01, 2012 to March 31, 2013, five (5) Meetings of the Board were held; on April 20, 2012, May 28, 2012, July 26, 2012, October 26, 2012 and January 28, 2013.The last Annual General Meeting (AGM) was held on July 26, 2012. Particulars of the directorship of Board, membership and office of the Chairman of Board Committees across all Companies as on March 31, 2013 and attendance at the Board Meetings of the Company are given below:

Name & Designation of the Director

No. of Meetings Category Held Attended 4 5 5 0 0 0 5 5 5 3

No.of Directorships and Committee Memberships/Chairmanships Directorships held @ 10 2@@ 4 Nil Nil Nil 2@@@ 2@@@ 2@@@ Nil Committee Memberships# 6 1 4 Nil Nil Nil 1 Nil Nil Nil Committee Chairmanships# 4 1 1 Nil Nil Nil Nil Nil Nil Nil

Whether Attended Last AGM

Mr. D.J. Balaji Rao (Chairman)% Mr. B.S. Iyer (Director) Mr. B. C. Prabhakar (Director) Mr. Albert C Wang (Director) Mr. Frank R Little (Director)** Mr. John R Houle (Director)** Mr. Ajay Nanavati (Managing Director) Mr. B. V. Shankaranarayana Rao (Whole-time Director) Mrs. Sadhana Kaul (Whole-time Director) Mr. R. Vijay Kumar (Whole-time Director)*

Non-Executive & Independent Director Non-Executive & Independent Director Non-Executive & Independent Director Non-Executive Director (Promoter Group) Non-Executive Director (Promoter Group) Non-Executive Director (Promoter Group) Executive Director (Promoter Group) Executive Director (Promoter Group) Executive Director (Promoter Group) Executive Director (Promoter Group)

5 5 5 5 5 5 5 5 5 5

Yes Yes Yes No NA NA Yes Yes Yes Yes

@ excludes directorship in private companies, @@ includes one alternate directorship @@@includes directorship in one foreign Body Corporate # excludes committees other than Audit Committee and Shareholders/Investors Grievance Committee * Resigned as a Director w.e.f October 26, 2012 ** Appointed as a Director w.e.f October 26, 2012

34

3M India Limited
REPORT ON CORPORATE GOVERNANCE
CODE OF CONDUCT The Companys Board has laid down a code of conduct for all Board Members and Senior Management of the Company. The code of conduct is available on the website of the Company: www.3m.com/in. Requisite annual affirmations of compliance with respective codes have been made by the Directors and Senior Management of the Company for the period April 01, 2012 to March 31, 2013. The Certificate by the CEO of the Company concerning compliance with the Code of Conduct for Directors and Senior Management is given below: Code of Conduct for Directors and Senior Management CEO Confirmation I hereby confirm that: the Company has obtained from the Directors and Senior Management personnel affirmation that they have complied with the above code for and in respect of the year ended March 31, 2013. Place: Bangalore Date : May 30, 2013 AUDIT COMMITTEE The Audit Committee of the Company functions in accordance with the requirements of Section 292A of the Companies Act, 1956 and the Listing Agreement. Terms of Reference of Audit Committee: The terms of reference of the Audit Committee as per guidelines set out under Clause 49 of the Listing Agreement with the Stock Exchanges read with Section 292A of the Companies Act, 1956, is set out below: Chairman of the Audit Committee shall be an Independent Director. The Audit Committee may invite such executives of the Company as it considers appropriate (and particularly the head of the finance function) to be present at the meetings of the Committee, but on occasions it may also meet without the presence of any of the executives of the Company. The Finance Director, Head of Internal Audit and a representative of the statutory auditor may be present as invitees for the meetings of the Audit Committee. The Company Secretary shall act as Secretary of the Audit Committee. The Audit Committee shall meet at least four times in a year and not more than four months shall elapse between two meetings. The quorum shall be either two members or one-third of the members of the Audit Committee, whichever is higher but there shall be a minimum of two independent members present. (Ajay Nanavati) Managing Director

Role of Audit Committee: The role of the Audit Committee shall include the following: Overview of the Companys financial reporting process and the disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible. Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the Statutory Auditors and the fixation of audit fees. Approval of payment to Statutory Auditors for any other services rendered by them. Reviewing, with the management, the annual financial statements before submission to the Board for approval, with particular reference to: - Matters required to be included in the Directors Responsibility Statement to be included in the Boards report in terms of clause (2AA) of Section 217 of the Companies Act, 1956. - Changes, if any, in accounting policies and practices and reasons for the same. - Major accounting entries involving estimates based on the exercise of judgment by Management. - Significant adjustments made in the financial statements arising out of audit findings. - Compliance with listing and other legal requirements relating to financial statements. - Disclosure of any related party transactions. - Qualifications, if any, in the draft limited review audit report and audit report.

35

REPORT ON CORPORATE GOVERNANCE


Reviewing, with the Management, the quarterly financial statements before submission to the Board for approval. Reviewing, with the Management, performance of Statutory and Internal Auditors, adequacy of the internal control systems. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure, coverage and frequency of internal audit. Discussion with Internal Auditors any significant findings and follow-up there on. Reviewing the findings of any internal investigations by the Internal Auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. Discussion with Statutory Auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividends) and creditors. Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.

Powers of the Audit Committee: The Audit Committee has the following powers: to investigate any activity within its terms of reference. to seek information from any employee. to obtain outside legal or other professional advice. to secure the attendance of outsiders with relevant expertise, if it considers necessary.

Review of information by Audit Committee: The Audit Committee reviews the following information: Management discussion and analysis of financial condition and results of operations. Statement of significant related party transactions (as defined by the Audit Committee) submitted by Management. Management letters / letters of internal control weaknesses issued by the Statutory Auditors. Internal audit reports relating to internal control weaknesses. The appointment and removal of the Internal Auditor.

Constitution of Audit Committee: As on March 31, 2013, the Audit Committee of the Company consists of three (3) Non-Executive cum Independent Directors and all of them have financial and accounting knowledge. The members of the Committee are Mr. B. S. Iyer, Mr. D.J. Balaji Rao and Mr. B. C. Prabhakar. Mr. B. S. Iyer is the Chairman of the Audit Committee. The Company Secretary is the Secretary to the Committee. At the invitation of the Committee the Managing Director, the Internal Auditor, the Head of Finance, Head of Legal Department and Statutory Auditors attend the Audit Committee meetings. Composition and details of Audit Committee Meetings during the financial year: During the financial year April 01, 2012 to March 31, 2013, four (4) Meetings of the Audit Committee were held; on May 28, 2012, July 26, 2012, October 26, 2012 and January 28, 2013.The numbers of meetings attended during the year under review are as under: Name of the Committee Member Mr. .B.S. Iyer (Chairman) Mr. D.J. Balaji Rao % Mr. B. C. Prabhakar No. of Meetings held during the year under review 4 4 4 No. of Meetings attended 4 3 4

Note: %-For the Committee/Board Meetings held on October 26, 2012, Mr. Balaji Rao participated through tele-conference.

36

3M India Limited
REPORT ON CORPORATE GOVERNANCE
SHAREHOLDERS / INVESTORS GRIEVANCE COMMITTEE As on March 31, 2013, the Shareholders/Investors Grievance Committee of the Company consists of four (4) Directors, of which three (3) are Non-Executive cum Independent Directors and one (1) is a Executive Director. The Members of the Committee are Mr. D.J. Balaji Rao, Mr. B. S. Iyer, Mr. B. C. Prabhakar and Mr. Ajay Nanavati. During the financial year April 01, 2012 to March 31, 2013, four (4) Meetings of the Shareholders Grievance Committee were held; on May 28, 2012, July 26, 2012, October 26, 2012 and January 28, 2013.The attendance of the members at the Shareholders Grievance Committee Meeting held during the year are as under : Name of the Committee Member Mr. D.J. Balaji Rao (Chairman) % Mr. B.S. Iyer Mr. B. C. Prabhakar Mr. Ajay Nanavati No. of Meetings held during the year under review 4 4 4 4 No. of Meetings attended 3 4 4 4

Mr. D. J. Balaji Rao, Non-Executive and Independent Director, is the Chairman of the Committee and Mr. V. Srinivasan, Company Secretary is the Compliance Officer of the Company. The Shareholders Grievance Committee is authorised to: 1. 2. 3. Monitor the system of share transfer, transmission, sub-division, consolidation of share certificates and issue of duplicate certificates. Deal with all investor related issues including redressal of complaints from shareholders relating to transfer of shares, non-receipt of annual report, etc. Delegate such powers to Companys officers, as may be necessary including powers to approve transfers, transmissions, authenticate share certificates and to take other actions in relation to Shareholders related matters.

The Company through its Registrar and Share Transfer Agents has resolved most of the investor grievances / correspondence within a period of 7 days from the date of their receipt except in cases that are constrained by disputes or legal impediments. The statistics of Shareholders complaints received / redressed, during the period under review are as under: No. of Shareholders complaints pending as at April 01, 2012. No. of Complaints relating to Non-receipt of dividend warrants, Redemption / Interest warrants, Annual Reports, Share certificates, endorsement stickers, change of address, deletion of name and others received during the period April 01, 2012 to March 31, 2013. No. of Shareholders complaints resolved during the period April 01, 2012 to March 31, 2013. No. of Shareholders complaints pending as on March 31, 2013. Secretarial Audit for Reconciliation of Capital A Secretarial Audit was carried out by a qualified Practicing Company Secretary for reconciling the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and the total issued and listed capital. The audit confirms that the total issued/paid up capital is in agreement with the total number of shares held in physical form and the total number of dematerialized shares held with NSDL and CDSL. This audit is carried out every quarter and the report thereon is submitted to the stock exchanges and is also placed before the Board of Directors. SUBSIDIARY COMPANIES The Company does not have any subsidiaries. DISCLOSURES Related party transactions: The Company follows the following policy in disclosing the related party transactions to the Audit Committee: A statement in summary form of transactions with related parties at arms length price in the normal course of business. Nil

24 24 Nil

37

REPORT ON CORPORATE GOVERNANCE


All material individual transactions with related parties, which are not in the normal course of business and which are not on an arms length basis. All material financial and commercial transactions relating to senior management where they have personal interest that may have a potential conflict with the interest of the Company at large.

Accounting Treatment: The guidelines/accounting standards notified under Section 211(3C) of the Companies Act, 1956 and relevant provisions of the Companies Act, 1956 have been followed in preparation of the financial statements of the Company. Risk Management: The Company as part of its regular operating review has identified certain risks and put in place procedures to mitigate the same. When new risks are identified, the same would be then assessed, controls designed, put in place and enforced within a fixed time frame, as set. Capital Issues: The Company has not made any capital issues during the financial year 2012-13. Remuneration to Directors: As on March 31, 2013, Company has three (3) Executive Directors, Mr. Ajay Nanavati, Managing Director, Mr. B. V. Shankaranarayana Rao, Whole-time Director, Mrs. Sadhana Kaul, Whole-time Director and Mr. R. Vijay Kumar, Whole-time Director (up to October 26, 2012). The Managing/Whole-time Directors of the Company have been appointed on a contractual basis and their terms of appointment were fixed by the Board and the appointments pertaining to Mr. Ajay Nanavati, Managing Director, Mr. B. V. Shankaranarayana Rao, Wholetime Director, Mrs. Sadhana Kaul, Whole-time Director were approved by the Shareholders at the Annual General Meetings for tenures up to five (5) years. The elements of the remuneration package of Executive Directors comprise Salaries & Allowances, Perquisites, Company Leased Accommodation, Company Car and driver, Telephone at home, club fees, Gratuity, Personal Accident Insurance and contribution to provident funds and other funds. The contract of employment of Executive Directors is terminable by observing a period of notice of ninety days. The Company has no stock option/equity-based awards or any other Stock Linked Incentive Plans. However senior executives of the Company including Managing Director and Whole-time Directors of the Company are entitled to the Restricted Stock options/Stock Appreciation Unit Plans declared by the Parent Company, 3M Company USA, from time to time. And as per 3M International Policy, the Company which employs the respective employees is required to bear the cost of the options. Details of remuneration for the year ended March 31, 2013: (a) Executive Directors.
Name and Designation No. of Shares Held 70* Nil Nil Nil Salaries & Allowances (Rs.) 2,03,46,247 83,13,996 74,78,634 42,21,000 Contribution to Provident Fund & Other Funds 11,36,448 5,12,952 4,63,749 2,62,101 Estimated Value of Benefits (Rs.) 57,22,687 28,45,152 30,20,321 8,84,313 Total (Rs.) 2,72,05,382 1,16,72,100 1,09,62,704 53,67,414 Present term expires on September 30, 2013 March 31, 2017 October 08, 2014 NA

Mr. Ajay Nanavati (Managing Director) Mr. B.V. Shankaranaryana Rao (Whole-time Director) Mrs. Sadhana Kaul (Whole-time Director) Mr. R. Vijay Kumar (Whole-time Director) (upto October 31, 2012) * includes joint share holding (b) Non-Executive Directors.

Name of the Director Mr. D.J. Balaji Rao Mr. B.S. Iyer Mr. B.C. Prabhakar * **

No. of Share held Nil 20* 20

Sitting Fees for Sitting Fees for Commission Board Meeting (Rs.) Committee Meetings (Rs.) (Rs.) 80,000 1,00,000 1,00,000 1,20,000 1,60,000 1,60,000 7,50,000** 7,50,000** 7,50,000**

Total 9,50,000 10,10,000 10,10,000

Jointly as a 2nd shareholder with his wife Remuneration by way of Commission for the year 2012-13 will be paid to the Independent Directors after the accounts for the year 2012-13 have been adopted and approved by the shareholders at the ensuing AGM.

38

3M India Limited
REPORT ON CORPORATE GOVERNANCE
The remuneration by way of commission to Independent Directors commensurate with the activities of the Company, the responsibilities of the Independent Directors under the listing agreement with the stock exchanges and under the Companies Act, 1956, and the responsibilities as member/chairman of the Board and member/chairman of committee/s of Board and all other relevant factors. Mr. Albert C Wang, Mr. Frank R Little and Mr. John R Houle do not receive Sitting Fees and Commission. None of the NonExecutive Directors have any pecuniary relationship with the Company. GENERAL BODY MEETING: Details of Annual General Meetings (AGM) of the Company held for the last three years: Date July 26, 2010 July 28, 2011 July 26,2012 Meeting AGM AGM AGM Location The Chancery Pavilion, 135, Residency Road, Bangalore 560 025 The Chancery Pavilion, 135, Residency Road, Bangalore 560 025 The Chancery Pavilion, 135, Residency Road, Bangalore 560 025 Time 10.30 a.m. 10.30 a.m. 10.30 a.m.

Particulars of Special Resolutions passed in the last three AGMs are given below: July 26, 2010 June 28, 2011 July 26,2012 The special resolutions passed through Postal Ballot were taken on record. Nil. Nil.

There are no items requiring the passing of special resolution or resolution by postal ballot at the ensuing Annual General Meeting (AGM) to be held on July 23, 2013. Details of non-compliance by the Company, penalties, and strictures imposed on the Company by Stock Exchange or SEBI or any statutory authority, on any matter related to capital markets, during the last three years: There have been no instances of non-compliance by the Company on any matter related to listing agreement with the stock exchanges. Compliance with Mandatory Requirements: The Company has complied with all the mandatory requirements of clause 49 of the listing agreement. As regards the nonmandatory requirements the extent of compliance has been stated in this report against each item. Management Discussion and Analysis: The Management Discussion and Analysis report on the Companys activities during the year is published as part of the Companys Annual Report. This report has been placed before the Companys Audit Committee. Insider Trading: Pursuant to the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, the Company has prescribed a Code of Conduct for Prevention of Insider Trading and a Code of Corporate Disclosure Practices. The Company observes a closed period for trading in securities of the Company by the Directors/Officers and Designated Employees of the Company for a period of seven days prior to the close of the quarter/half year/year and up to 24 hours after the date on which the results for the respective quarter/half year/year and is notified to the stock exchanges. MEANS OF COMMUNICATION Quarterly/half yearly/annual financial results are published in Business Standard (All India Edition) and Udaya Vani (Bangalore Edition).The Companys financial results and shareholding pattern are also displayed in the Companys website: www.3m.com/in and are also notified to the Stock Exchanges as required under the Listing Agreement. From the quarter ending September 30, 2011, shareholding pattern and the Corporate Governance details are uploaded in the NSE Electronic Application Processing System (NEAPS). The Company does not make any presentations to the Institutional Investors or to the Analysts. SHAREHOLDERS Details of the Directors seeking appointment/re-appointment at the ensuing AGM are provided in the Notice convening the AGM.

39

REPORT ON CORPORATE GOVERNANCE


NON-MANDATORY REQUIREMENTS The Company has a Non-Executive Chairman and his official expenses are reimbursed. However, no separate Chairmans office is maintained at the Companys expense. Remuneration Committee: The Board has not set up a Remuneration Committee. Shareholders Rights: Quarterly/half yearly/annual financial results are published in English Newspaper having a circulation all over India and in Kannada newspaper (having circulation in Bangalore). Significant events of the Company are being disclosed to the Stock Exchanges from time to time. The Companys financial results and shareholding pattern are also displayed in the Companys website: www.3m.com/ in and are also notified to the Stock Exchanges as required under the Listing Agreement. With effect from April 01, 2011, the Company also displays in their website, the quarterly report sent to the Stock Exchanges on the Compliance on Corporate Governance under Clause 49 of the Listing agreement. From the quarter ending September 30, 2011, shareholding pattern and the Corporate Governance details are uploaded in the NSE Electronic Application Processing System (NEAPS). Audit qualifications: There were no qualifications by the Auditors in their report forming part of this financials for the year ended March 31, 2013. Training of Board Members: The Company does not have any training program for the Board members. Mechanism for evaluating Non-Executive Board Members: There is no specific mechanism for evaluating the performance of non-executive Board members of the Company. Whistle-Blower policy: The Company does not have a Whistle Blower policy. However, 3M has a Global Policy on Business Conduct and guidelines on Ethical Behavior which encourages employees to raise and report concerns in a transparent way. No personnel of the Company have been denied access to any of the Directors of the Company. As a part of this global policy, no retaliatory action may be taken against any whistle blower. GENERAL SHAREHOLDER INFORMATION : July 23,2013, Tuesday The Grand Ball Room The Chancery Pavilion 135, Residency Road, Bangalore - 560 025 Time 10.30 a.m. July 17, 2013( Wednesday) - July 23, 2013(Tuesday) (both days inclusive) N. A. Third week of July, 2013 Fourth week of October, 2013 Fourth week of January, 2014 Fourth week of May, 2014 Listing on Stock Exchanges - Unaudited Results for the quarter and three months ended June 30, 2013. - Unaudited Results for the quarter and six months ended September 30, 2013. - Unaudited Results for the quarter and nine months ended December 31, 2013. - Audited Results for the year ended March 31, 2014.

Annual General Meeting

Date of Book Closure Dividend payment date Financial Results Calendar

National Stock Exchange Limited, Mumbai (Code - 3M INDIA) Bombay Stock Exchange Limited, Mumbai (Code - 523395) The Calcutta Stock Exchange Limited, Kolkata (Code - 12027) * INE470A01017 L31300KA1987PLC013543

International Securities Identification Number (ISIN ) Corporate Identification Number (CIN)

* applied for voluntary delisting. Final Certificate of delisting is yet to be received.

40

3M India Limited
REPORT ON CORPORATE GOVERNANCE
The Company has paid annual listing fees, as prescribed, to the National Stock Exchange of India Limited and Bombay Stock Exchange Limited, Mumbai for the financial year 2013-14. Custodial Fee Pursuant to the Securities and Exchange Board of India (SEBI) Circular No. MRD/DoP/SE/DEP/CIR-2/2009 dated February 10, 2009 and CIR/MRD/DP/05/2011 dated 27th April, 2011, Issuer Companies are required to pay custodial fees to the depositories on the basis of average number of folios (ISIN position) during the previous financial year or the minimum amount as specified. Accordingly, the Company has paid custodial fee for the year 2013-14 to NSDL and CDSL. Registrar & Share Transfer Agents: Share registration and other investor related activities are carried out by our Registrar and Transfer Agents, M/s. Karvy Computershare Private Limited for both Physical and Demat securities. Their address is given below: Karvy Computershare Private Limited Plot No.17-24, Vithal Rao Nagar, Madhapur; Hyderabad - 500 034 Tel: 040-4465 5178-828 Fax: 040-23440814 E-mail: mailmanager@karvy.com. Contact person: Mr. K.S. Reddy / Mr. Shyam Singh Rautela Share Transfer System: Shares sent for transfer in physical form are registered and dispatched within 15 days of receipt of the documents, if documents are found to be in order. Shares under objection are returned within 15 days. Monitoring of Share Transfers and other investor related matters are dealt with by the Shareholders Grievance Committee. The Companys Registrars, M/s. Karvy Computershare Private Limited process the share transfers in respect of physical securities on a fortnightly basis and the processed transfers are approved by the authorized Executives of the Company also on a fortnightly basis. All requests for dematerialization of shares, which are in order, are processed within 15 days and the confirmation is given to the respective depositories, i.e., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Stock Price Data : Bombay Stock Exchange (BSE) Month April 2012 May 2012 June 2012 July 2012 August 2012 September 2012 October 2012 November 2012 December 2012 January 2013 February 2013 March 2013 High (Rs.) 4,529.00 4,099.95 3,900.00 4,185.00 4,207.00 4,250.00 4,237.00 4,165.00 4,186.90 4,225.00 4,034.80 3,800.00 Low (Rs.) 3,680.00 3,366.65 3,511.00 3,650.05 3,200.00 3,965.65 3,795.00 3,649.00 3,780.10 3,455.55 3,550.00 3,330.00 No. of shares traded 6,435 4,938 3,303 1,19,949 5,662 4,208 8,058 6,081 5,755 3,257 5,939 12,291 National Stock Exchange (NSE) High (Rs.) 4,659.00 4,200.00 3,909.95 4,118.35 4,200.00 4,200.00 4,181.45 4,130.00 4,200.05 4,750.00 4,039.00 3,791.45 Low (Rs.) 3,871.05 3,519.05 3,519.00 3,625.05 3,686.15 4,000.00 3,801.00 3,650.00 3,900.10 3,900.10 3,500.00 3,301.00 No. of shares traded 6,751 7,466 3,922 8,521 5,976 11,283 13,351 19,932 29,155 20,662 24,090 36,075

41

REPORT ON CORPORATE GOVERNANCE


Stock Performance : BSE Sensex Vs. 3M Share Price (Monthly Closing Price)

NSE-S&P CNX Nifty Vs 3M Share price (Monthly Closing Price)

Consolidated Shareholding Pattern as on March 31, 2013: Category Foreign Promoter(FPR)* Foreign Institutional Investors(FII) Resident Individuals (PUB) Bodies Corporate(LTD) Mutual Funds(MUT) Hindu Undivided Family HUF) Non-Resident Indians(NRI) Clearing Members(CM) Other Banks Trust Nationalised Banks Insurance Companies(IFI) Total No. of shareholders 1 21 8,641 283 10 250 178 40 2 3 2 1 9,432 Shares held in Physical form 1,05,414 5,020 440 20 60 1,10,954 Shares held in dematerialized Form 84,48,802 11,02,691 9,35,102 3,39,772 2,54,242 33,992 34,391 1,068 3,485 511 60 1,11,54,116 Total No. of shares held 84,48,802 11,02,691 10,40,516 3,44,792 2,54,682 33,992 34,391 1,068 3,485 511 80 60 1,12,65,070 % to capital 75.00 9.79 9.24 3.06 2.26 0.30 0.31 0.01 0.03 0.00 0.00 0.00 100.00

* None of Foreign promoter shares been pledged as on March 31, 2013 Pursuant to SEBI Circular No. Cir/ISD/3/2011 dated June 17, 2011, the Company has achieved 100% of Promoters shareholding in dematerialized Form.

42

3M India Limited
REPORT ON CORPORATE GOVERNANCE
Consolidated shareholding pattern as on 31.03.2013

Summary of Shareholding as on March 31, 2013: Category PHYSICAL NSDL CDSL TOTAL No. of Holders 1,519 6,132 1,781 9,432 Total Shares 1,10,954 1,07,92,097 3,62,019 1,12,65,070 % To Equity 0.99 95.80 3.21 100.00

Top Ten (10) Shareholders of the Company as on March 31, 2013: Client id 10716469 10013042 10022345 10013034 1301240000121844 10024287 10015282 11183553 10029040 22502222 10013026 Name of the Shareholder 3M Company, USA Acacia Partners, LP Acacia Conservation Fund LP Acacia Institutional Partners, LP Bright Star Investments Private Limited Acacia Banyan Partners Tata Offshore India Opportunities Scheme SBI Emerging Businesses Fund Blackrock India Equities Fund (Mauritius) Limited Govindlal M Parikh Chinmay G Parikh Acacia II Partners, LP No. of shares held 84,48,802 3,99,127 2,29,278 2,04,600 1,66,700 1,64,545 1,19,938 1,14,088 51,917 38,115 29,667 % to paidup capital 75.00 3.54 2.04 1.82 1.48 1.46 1.06 1.01 0.46 0.34 0.26 Category FPR FII FII FII LTD FII MUT MUT FII PUB FII

43

REPORT ON CORPORATE GOVERNANCE


Distribution of Shareholding as on March 31, 2013: Range of Shares Up to 50 51 to 100 101 to 200 201 to 500 501 to 1000 1001 to 2000 2001 to 5000 5001 to 10000 10001 and above TOTAL No. of Shareholders 5,455 2,767 530 356 151 69 54 27 23 9,432 % to total Shareholders 57.84 29.34 5.62 3.77 1.60 0.73 0.57 0.29 0.24 100.00 No of Shares held 1,01,448 2,27,457 86,529 1,24,575 1,12,287 1,00,124 1,54,289 1,91,962 1,01,66,399 1,12,65,070 Amount (Rs.) 10,14,480 22,74,570 8,65,290 12,45,750 11,22,870 10,01,240 15,42,890 19,19,620 10,16,63,990 11,26,50,700 % to Total Shares 0.90 2.02 0.77 1.11 1.00 0.89 1.37 1.70 90.25 100.00

Dematerialization of Shares and Liquidity 99.02% of the total equity capital was held in dematerialised form as on March 31, 2013. Outstanding GDRs / Warrants, Convertible Bonds, conversion date and likely impact on equity: Not Applicable Plant Locations : 1. Plot No. 48-51, Electronics City, Hosur Road, Bangalore-560 100 2. Plot No.8, Moraiya Industrial Area; Tal Sanand, Sarkhej Bavla Highway, Ahmedabad 382 213 3. Plot No.B-20, MIDC; Ranjangaon Industrial Area Tal: Shirur, Dist : Pune - 412 210 Address for correspondence Registered Office : Plot Nos. 48-51, Electronics City, Hosur Road, Bangalore 560 100 Corporate Office : Concorde Block, UB City, 24, Vittal Mallya Road, Bangalore 560 001

Designated e-mail id for redressel of investor complaints in terms of Clause 47(f ) of the Listing Agreement is: 3mindia.investorshelpdesk@mmm.com Compliance Officer: Mr. V.Srinivasan, Company Secretary. Inquiries, if any, may be addressed to the Compliance Officer. CEO / CFO CERTIFICATION The Managing Director and the Whole-time Director heading the Finance function of the Company/CFO have given annual certification to the Board in terms of Clause 49 of the Listing Agreement. They also give quarterly certification on the financial results while placing the financial results before the Board in terms of Clause 41 of the Listing Agreement. CERTIFICATE OF COMPLIANCE Certificate from Mr. G. Shanker Prasad, Practising Company Secretary, Bangalore confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is attached to the Directors report forming part of the annual report. This Certificate shall be forwarded to the Stock Exchanges where the securities of the Company are listed. On behalf of the Board of Directors

Place : Bangalore Date : May 30, 2013

Ajay Nanavati Managing Director

Sadhana Kaul Whole-time Director

44

3M India Limited

CERTIFICATE ON CORPORATE GOVERNANCE


To the Members of 3M India Limited I have reviewed the compliance of conditions of Corporate Governance by 3M India Limited (the Company), for the year ended on 31 March 2013, as stipulated in clause 49 of the listing agreement of the said Company with stock exchanges. The compliance of conditions of Corporate Governance is the responsibility of the management. My examination has been limited to a review of the procedures and implementation thereof adopted by the Company for ensuring the compliance with the conditions of the certificate of Corporate Governance as stipulated in the said Clause. It is neither an audit nor an expression of opinion on the financial statements of the Company. No investor grievance is pending for a period exceeding one month against the Company as per the records maintained by the Company. In my opinion and to the best of my information and according to the explanations given to me and based on the representations made by the Directors and the Management, I certify that the Company has complied with the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement. I further state that such compliance is neither an assurance as to the future viability of the Company nor of the efficiency or effectiveness with which the management has conducted the affairs of the Company.

Place : Bangalore Date : May 30, 2013

G. SHANKER PRASAD Practising Company Secretary CP No. : 6450

45

INDEPENDENT AUDITORS REPORT


To the Members of 3M India Limited Report on the Financial Statements 1. We have audited the accompanying financial statements of 3M India Limited (the Company), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information, which we have signed under reference to this report. Managements Responsibility for the Financial Statements 2. The Companys Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 of India (the Act). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error. Auditors Responsibility 3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 4. An audit involves performing procedures to obtain audit evidence, about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Companys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

5.

Opinion 6. In our opinion, and to the best of our information and according to the explanations given to us, the accompanying financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013; (b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and (c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date. Report on Other Legal and Regulatory Requirements 7. As required by the Companies (Auditors Report) Order, 2003, as amended by the Companies (Auditors Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act (hereinafter referred to as the Order), and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order. 8. As required by section 227(3) of the Act, we report that: (a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of our audit; (b) In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; (c) The Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account; (d) In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Act; (e) On the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the Directors is disqualified as on March 31, 2013, from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Act. For Lovelock & Lewes Firm Registration No.301056E Chartered Accountants Place : Bangalore Date : May 30, 2013 Dibyendu Majumder Partner Membership No. : 057687

46

3M India Limited

ANNEXURE TO INDEPENDENT AUDITORS REPORT


Referred to in paragraph 7 of the Independent Auditors Report of even date to the members of 3M India Limited on the financial statements as of and for the year ended March 31, 2013. i. (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation, of fixed assets. (b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies have been noticed on such verification. (c) In our opinion, and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the Company during the year. ii. (a) The inventory excluding stocks with third parties has been physically verified by the Management during the year. In respect of inventory lying with third parties, these have substantially been confirmed by them. In our opinion, the frequency of verification is reasonable. (b) In our opinion, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material. iii. (a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Therefore, the provisions of Clause 4(iii) (b), (c) and (d) of the said Order are not applicable to the Company. (b) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Therefore, the provisions of Clause 4(iii) (f ) and (g) of the said Order are not applicable to the Company. iv. In our opinion, and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across, nor have been informed of, any continuing failure to correct major weaknesses in the aforesaid internal control system. v. (a) According to the information and explanations given to us, there have been no contracts or arrangements that need to be entered in the register maintained under Section 301 of the Act. In our opinion, and according to the information and explanations given to us, there are no transactions made in pursuance of such contracts or arrangements exceeding the value of Rupees Five Lakhs in respect of any party during the year. vi. The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under. vii. In our opinion, the Company has an internal audit system commensurate with its size and the nature of its business. viii. We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of subsection (1) of Section 209 of the Act, and are of the opinion that, prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

(b)

47

ANNEXURE TO INDEPENDENT AUDITORS REPORT


ix. (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is generally regular in depositing undisputed statutory dues in respect of professional tax, though there has been a slight delay in a few cases, and is regular in depositing undisputed statutory dues, including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, customs duty, excise duty and other material statutory dues, as applicable, with the appropriate authorities. (b) According to the information and explanations given to us and the records of the Company examined by us, there are no dues of, wealth-tax which have not been deposited on account of any dispute. The particulars of dues of income tax, sales tax, service-tax, customs duty and excise duty as at March 31, 2013 which have not been deposited on account of a dispute, are as follows: Name of the statute
The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 The Income Tax Act, 1961 Customs Act, 1962

Nature of dues

Demand Payment Net Amount Amount under protest (Rs. in Lakhs) (Rs. in Lakhs) (Rs. in Lakhs)
231.24 242.42 386.59 462.16 1,961.51 83.71 231.24 158.71 386.59 462.16 1,961.51

Period to which the amount relates


Assessment Year 2005-06 Assessment Year 2006-07 Assessment Year 2007-08 Assessment Year 2008-09 Financial Years 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Financial Year 2008 09 2009 10 Financial Year 2008 09 2009 10 Financial Year 2003 - 04 2004 - 05 Financial Year 2003 - 04 2004 - 05 Financial Year 2010 - 11

Forum where the dispute is pending


Income Tax Appellate Tribunal Income Tax Appellate Tribunal Commissioner of Income Tax (Appeals) Commissioner of Income Tax (Appeals) Customs, Excise & Service Tax Appellate Tribunal

Income Tax and Interest Income Tax and Interest Income Tax and Interest Income Tax and Interest Customs Duty, Interest and penalty

The West Bengal Value Added Tax Rules, 2005 The Central Sales Tax (West Bengal) Rules, 1958 The Bombay Sales Tax Act, 1959 The Central Sales Tax (Bombay) Rules, 1957 Central Excise Act, 1944 and Finance Act, 1994

Value Added Tax (VAT) Central Sales Tax (CST) Bombay Sales Tax (BST) Central Sales Tax (CST) Service Tax, interest and penalty

18.82 0.63 16.25 20.04 65.31 59.07 0.50 36.78 113.42

20.00 20.00 0.20 12.00 -

18.82 0.63 16.25 20.04 45.31 39.07 0.30 24.78 113.42

The Senior Jt. Commissioner, Commercial Tax The Senior Jt. Commissioner, Commercial Tax Jt. Commissioner of Sales Tax (Appeal) III, Mumbai Jt. Commissioner of Sales Tax (Appeal) III, Mumbai Central Excise and Service Tax Appeals Tribunal

x.

The Company has no accumulated losses as at the end of the financial year and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year.

xi. According to the records of the Company examined by us and the information and explanation given to us, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date. xii. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of Clause 4(xii) of the Order are not applicable to the Company. xiii. As the provisions of any special statute applicable to chit fund/ nidhi/ mutual benefit fund/ societies are not applicable to the Company, the provisions of Clause 4(xiii) of the Order are not applicable to the Company.

48

3M India Limited

ANNEXURE TO INDEPENDENT AUDITORS REPORT


xiv. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of Clause 4(xiv) of the Order are not applicable to the Company. xv. In our opinion, and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year. Accordingly, the provisions of Clause 4(xv) of the Order are not applicable to the Company. xvi. The Company has not raised any term loans. Accordingly, the provisions of Clause 4(xvi) of the Order are not applicable to the Company. xvii. According to the information and explanations given to us and on an overall examination of the Balance Sheet of the company, we report that the no funds raised on short-term basis have been used for long-term investment. xviii. The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year. Accordingly, the provisions of Clause 4(xviii) of the Order are not applicable to the Company. xix. The Company has not issued any debentures during the year and does not have any debentures outstanding as at the beginning of the year and at the year end. Accordingly, the provisions of Clause 4(xix) of the Order are not applicable to the Company. xx. The Company has not raised any money by public issues during the year. Accordingly, the provisions of Clause 4(xx) of the Order are not applicable to the Company. xxi. During the course of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of material fraud on or by the Company, noticed or reported during the year, nor have we been informed of any such case by the Management. For Lovelock & Lewes Firm Registration No.301056E Chartered Accountants Dibyendu Majumder Place : Bangalore Date : May 30, 2013 Partner Membership No. : 057687

49

BALANCE SHEET AS AT MARCH 31, 2013


(All amounts in Rs. Lakhs, unless otherwise stated) Notes EQUITY AND LIABILITIES SHAREHOLDERS FUNDS Share Capital Reserves and Surplus NON-CURRENT LIABILITIES Long-term Borrowings Long-term Provisions CURRENT LIABILITIES Short-term Borrowings Trade Payables Other Current Liabilities Short-term Provisions TOTAL ASSETS NON-CURRENT ASSETS Fixed Assets Tangible Assets Intangible Assets Capital Work-in-Progress Deferred Tax Assets (Net) Long-term Loans and Advances Other Non-Current Assets CURRENT ASSETS Inventories Trade Receivables Cash and Bank Balances Short-term Loans and Advances TOTAL The notes are an integral part of these financial statements. This is the Balance Sheet referred to in our report of even date For Lovelock & Lewes Firm Registration No.301056E Chartered Accountants Dibyendu Majumder Partner Membership No: 057687 Place : Bangalore Date : May 30, 2013 Place : Bangalore Date : May 30, 2013 For and on behalf of the Board 15 16 17 18 22,521.10 26,637.18 5,958.34 5,572.90 106,273.02 21,371.66 23,311.37 5,388.98 6,388.66 92,135.27 12 13 14 11 29,398.42 557.07 12,084.96 906.47 2,226.80 409.78 28,385.28 602.07 2,080.14 440.48 4,087.82 78.81 7 8 9 10 16,040.43 12,796.67 9,695.72 40.98 106,273.02 6,118.96 14,508.23 9,026.25 38.10 92,135.27 5 6 769.13 1,286.45 919.83 1,106.79 3 4 1,126.51 64,517.13 1,126.51 59,290.60 As at March 31, 2013 As at March 31, 2012

Ajay Nanavati Managing Director Zinan Wadood Chief Financial Officer

Sadhana Kaul Whole-time Director V.Srinivasan Company Secretary

50

3M India Limited

STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2013
(All amounts in Rs. Lakhs, unless otherwise stated) Notes INCOME Revenue from Operations (Gross) Less: Excise Duty Revenue from Operations (Net) Other income Total Revenue EXPENSES Cost of materials consumed Purchases of stock-in-trade Changes in inventories of finished goods, work-in-progress and stock-in-trade Employee Benefits Expense Finance costs Depreciation and Amortization Expense Other Expenses Total Expenses Profit before tax Tax expense: Current tax Deferred tax Profit for the year Earnings per equity share: [Nominal Value per share Rs.10 (2012: Rs.10)] -Basic (Computed on the basis of total profit for the year) -Diluted (Computed on the basis of total profit for the year) 46.40 46.40 57.50 57.50 2,759.27 (465.99) 5,226.53 2,934.44 199.45 6,477.17 24 25 26 27 21 22 23 (406.78) 21,282.17 951.35 3,630.00 25,690.58 150,943.65 7,519.81 (5,974.97) 18,566.27 318.05 2,703.13 23,068.30 131,425.75 9,611.06 61,661.73 38,134.60 51,355.92 41,389.05 19 20 165,250.30 7,837.18 157,413.12 1,050.34 158,463.46 147,122.93 6,612.86 140,510.07 526.74 141,036.81 Year ended March 31, 2013 Year ended March 31, 2012

The notes are an integral part of these financial statements. This is the Statement of Profit and Loss referred to in our report of even date For Lovelock & Lewes Firm Registration No.301056E Chartered Accountants Dibyendu Majumder Partner Membership No: 057687 Place : Bangalore Date : May 30, 2013 Place : Bangalore Date : May 30, 2013 For and on behalf of the Board

Ajay Nanavati Managing Director Zinan Wadood Chief Financial Officer

Sadhana Kaul Whole-time Director V.Srinivasan Company Secretary

51

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2013
(All amounts in Rs. Lakhs, unless otherwise stated)
Year ended March 31, 2013 A. Cashflow from Operating Activities Profit before taxation Adjustment for: Depreciation Provision for doubtful debt (net) Provision for doubtful advances (net) Liabilities / Provision no longer required written back Unrealised foreign exchange Loss Loss on sale of tangible assets (net) Provision for asset written off Interest income Interest expenses Operating Profit Before Working Capital changes Changes in Working Capital: Increase/ (Decrease) in Trade Payables Increase/ (Decrease) in Provisions Increase/ (Decrease) in Other Current Liabilities Increase / (Decrease) in Other Non-Current Assets (Increase)/ Decrease in Trade Receivables (Increase)/ Decrease in Inventories (Increase)/ Decrease in Loans and Advances Cash generated from Operations Direct Taxes paid (net of refund) Net Cash flow from Operating Activities B. Cash flow from Investing Activities Purchase of tangible/intangible assets Sale of tangible assets Interest Received Net cash used in investing activities C. Cash flow from Financing Activities Repayment of Loan Fund (Finance Lease) Short Term Borrowings Interest Paid Net cash from Financing Activities Net Increase/ (Decrease) in Cash in hand and Cash Equivalents (A+B+C) Cash and cash equivalents as at 1st April (Opening balance) Cash and cash equivalents as at the 31st March (Closing balance) Cash and Cash equivalents comprises of (refer note 17): Cash on hand Cheques, drafts on hand Balances with banks: Current Accounts Notes: 1 The above Cash Flow Statement has been prepared under indirect method in accordance with the Accounting Standard 3 as notified u/s 211(3C) of the Companies Act, 1956. 2 The above Cash Flow Statement has been compiled from and is based on the Balance Sheet as at 31st March, 2013 and the related Statement of Profit and Loss Account for the year ended 31st March, 2013. 3 Previous year's figures have been regrouped wherever necessary to conform to current year's presentation. This is the Cash Flow Statement referred to in our report of even date For Lovelock & Lewes Firm Registration No.301056E Chartered Accountants Dibyendu Majumder Partner Membership No: 057687 Place : Bangalore Date : May 30, 2013 Place : Bangalore Date : May 30, 2013 For and on behalf of the Board 7,519.81 3,630.00 460.19 460.00 (471.40) 21.18 34.82 (1.07) 951.35 12,604.88 (1,738.45) 224.48 1,056.91 (330.98) (3,780.28) (1,149.44) 1,876.77 8,763.89 (2,386.03) 6,377.86 (14,108.25) 12.47 1.07 (14,094.71) (683.91) 9,921.47 (951.35) 8,286.21 569.36 5,388.98 5,958.34 0.91 57.27 5,900.16 5,958.34 Year ended March 31, 2012 9,611.06 2,703.13 239.80 (114.23) 57.90 23.09 80.00 (11.82) 318.05 12,906.98 2,575.14 65.40 1,474.46 (3,919.80) (5,479.05) (2,336.23) 5,286.90 (3,197.69) 2,089.21 (7,108.35) 11.82 (7,096.53) (472.96) 6,118.96 (318.05) 5,327.95 320.63 5,068.35 5,388.98 0.99 82.62 5,305.37 5,388.98

Ajay Nanavati Managing Director Zinan Wadood Chief Financial Officer

Sadhana Kaul Whole-time Director V.Srinivasan Company Secretary

52

3M India Limited

NOTES TO THE FINANCIAL STATEMENTS


1. GENERAL INFORMATION 3M India Limited ('the Company') is the subsidiary of 3M Company, USA. The Company markets several products in India in health care; industrial markets; display and graphics; consumer and office; safety, security and protection services; and transportation. In India, the Company has manufacturing facilities at Ahemdabad, Bangalore, Pune and has a R&D Center in Bangalore. The Company manages its operations in five operating business segments: Industrial and Transportation Business; Health Care Business; Display and Graphics Business; Consumer and Office Business and Safety, Security and Protection Services Business. 3M Indias five business segments bring together common or related 3M technologies that enhance the development of innovative products and services and provide efficient sharing of business resources. The Company is a public limited Company and is listed on the Bombay Stock Exchange Ltd (BSE) and the National Stock Exchange Ltd (NSE). 2. STATEMENT ON SIGNIFICANT ACCOUNTING POLICIES a) Basis of preparation These financial statements have been prepared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis. These financial statements have been prepared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] and the other relevant provisions of the Companies Act, 1956. All assets and liabilities have been classified as current or non-current as per the Companys normal operating cycle and other criteria set out in the Schedule VI to the Companies Act, 1956. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities. b) Fixed assets Tangible Assets Tangible Assets are stated at acquisition cost, net of accumulated depreciation and accumulated impairment losses, if any. Subsequent expenditures related to an item of fixed asset are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance. Items of fixed assets that have been retired from active use and are held for disposal are stated at the lower of their net book value and net realisable value and are shown separately in the financial statements. Any expected loss is recognised immediately in the Statement of Profit and Loss. Losses arising from the retirement of, and gains or losses arising from disposal of fixed assets which are carried at cost are recognised in the Statement of Profit and Loss. Depreciation on fixed assets other than leasehold improvements is provided on straight line method at the following rates specified which are equal to or higher than the principal rates specified in Schedule XIV to the Companies Act, 1956: Building Plant and Machinery Data Processing Equipments Office Equipment Furniture and Fixtures Vehicles Per Annum 3.34% / 5.00% / 10.00% 6.67% / 10.00% / 14.14% 20.00% to 33.33% 20.00% 6.67% / 10.00% 20.00%

Assets individually costing less than Rs.5,000 are fully depreciated in the year of addition. Leasehold improvements are amortised over the period of lease as estimated by the management. Assets taken on finance leases are depreciated over the estimated useful life or the lease term, whichever is lower. Intangible Assets Intangible Assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortised on a straight line basis over their estimated useful lives. Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss. The amortisation rates used are: Per Annum 33.33% / 20.00%

Computer Software

Goodwill is amortised over the period of 5 years. Cost of Leasehold land (including stamp duty) is amortised over the period of lease.

53

NOTES TO THE FINANCIAL STATEMENTS


c) Impairment At the Balance Sheet date, the Company assesses whether there is any indication that an asset may be materially impaired. If such an indication exists, the Company estimates the recoverable amount. If the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised in the Statement of Profit and Loss to the extent carrying amount exceeds the recoverable amount. d) Inventories Inventories are valued at the lower of cost and estimated net realizable value, after providing for cost of obsolescence and other anticipated losses, wherever considered necessary. The costs of raw materials and traded goods are ascertained on FIFO basis, whereas manufactured work-in-progress and finished goods are ascertained on weighted average method. Finished goods and work-in-progress include costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. e) Foreign Currency Transactions Foreign currency transactions are recorded at the rates of exchange prevailing on the dates of the transactions. At the period end all monetary foreign assets and liabilities are restated at the rates ruling at the period end and all exchange gains / losses arising there from are adjusted to the Statement of Profit and Loss. f) Revenue Recognition Sales are recognised when goods are despatched in accordance with the terms of sale when significant risks and rewards are transferred and are recorded net of sales returns, trade discount, rebates and sales tax collected but includes excise duty, where applicable. Income from services rendered is booked based on agreements/ arrangements with concerned parties net of service tax. Income from duty drawback, scarp sales, contract research and management support services etc., is recognised on an accrual basis. g) Other Income Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. Income from sub-lease is recognised on an accrual basis. h) Employee Benefits Provident Fund Contribution towards provident fund for certain employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis. Gratuity The Company has an obligation towards gratuity, a defined benefit retirement plan covering eligible employees. The Company has an Employees Gratuity Fund where the investments are administered by a Fund Manager. The Company accounts for the liability of Gratuity Benefits payable in future based on an independent actuarial valuation. Actuarial losses/ gains are recognised in Statement of Profit and Loss in the year in which they arise. Superannuation The Company makes contribution to the Superannuation Scheme for certain employees participating in the scheme, a defined contribution scheme, administered by fund manager, based on a specified percentage of eligible employees salary. The Company's obligation to the scheme is restricted to the contributions to the scheme. Leave Encashment/ Compensated Absences The Company provides for the encashment of leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits, for future encashment/ availment. The liability is provided based on the number of days of unutilized leave at each balance sheet date on the basis of an independent actuarial valuation. i) Current tax and Deferred tax Taxes on income for the current year are determined on the basis of provisions of Income Tax Act, 1961. Tax expense for the period, comprising current tax and deferred tax, are included in the determination of the net profit or loss for the period. Current tax is measured at the amount expected to be paid to the tax authorities in accordance with the taxation laws prevailing in the respective jurisdictions. Deferred tax is recognised for all the timing differences, subject to the consideration of prudence in respect of deferred tax assets. Deferred tax assets are recognised and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. At each Balance Sheet date,

54

3M India Limited

NOTES TO THE FINANCIAL STATEMENTS


the Company reassesses unrecognised deferred tax assets, if any. Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws. j) Provisions and Contingent Liabilities Provisions Provisions are recognised when there is a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and there is a reliable estimate of the amount of the obligation. Provisions are measured at the best estimate of the expenditure required to settle the present obligation at the Balance Sheet date and are not discounted to its present value. Where the Company expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when reimbursement is virtually certain. Contingent Liabilities Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made, is termed as a contingent liability. k) Leases Finance Leases: The Company leases certain tangible assets and such leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Each lease payment is apportioned between the finance charge and the reduction of the outstanding liability. The outstanding liability is included in long-term borrowings and other current liabilities as appropriate. The finance charge is charged to the Statement of Profit and Loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Operating Leases: Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight line basis over the period of the lease. l) Segment Reporting The accounting policies adopted for segment reporting are in conformity with the accounting policies adopted for the Company. Revenue and expenses have been identified to segments on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the Company as a whole and are not allocable to segments on a reasonable basis, have been included under Unallocated income/ expenses. m) Cash and Cash Equivalents In the cash flow statement, cash and cash equivalents includes cash in hand, demand deposits with banks with original maturities of three months or less. n) Earnings per share Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. o) Expenditure Expenses are accounted for, on accrual basis and provision is made for all known losses and liabilities. Excise duty and customs duty are accrued on the goods lying at the factory premises. Revenue expenditure on Research and Development is charged against the profit for the period in which it is incurred. Capital expenditure on research and development is shown as an addition to fixed assets. p) Use of estimates The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the period reported. Actual results could differ from those estimates; a revision to accounting estimates is recognized prospectively in the current and future periods.

55

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) March 31, 2013 March 31, 2012

3. SHARE CAPITAL
AUTHORISED SHARE CAPITAL 11,265,070 (2012:11,265,070) Equity Shares of Rs. 10 each ISSUED, SUBSCRIBED & PAID UP CAPITAL 11,265,070 (2012:11,265,070) Equity Shares of Rs. 10 each Total a) Reconciliation of the number of shares outstanding: 31-Mar-13 Equity Shares Shares outstanding at the beginning of the year Shares issued during the year Shares bought back during the year Shares outstanding at the end of the year b) Rights, preferences and restrictions attached to shares The Company has only one class of shares referred to as equity shares having a par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding. c) Shares held by Holding Company 31-Mar-13 Number Rs. 8,448,802 844.88 31-Mar-12 Number 8,562,000 Rs. 856.20 Number 11,265,070 11,265,070 Rs. 1,126.51 1,126.51 31-Mar-12 Number 11,265,070 11,265,070 Rs. 1,126.51 1,126.51 1,126.51 1,126.51 1,126.51 1,126.51 1,126.51 1,126.51

3M Company, USA

d) Shares held by each shareholder holding more than 5 per cent shares 31-Mar-13 No. of Shares held % of Holding 3M Company, USA, the Holding Company 8,448,802 75.00%

31-Mar-12 No. of Shares held % of Holding 8,562,000 76.00%

In order to comply with 25% Minimum Public Shareholding as mandated by Securities and Exchange Board of India (SEBI), 3M Company, USA, promoter of the Company sold 113,198 shares through Offer for Sale (OFS) method through Stock Exchanges on March 21, 2013, accordingly the percentage of shareholding is reduced from 76% to 75%.

4. RESERVES AND SURPLUS


Securities Premium Account Balance as at the beginning of the year Add: Additions during the year Less: Amount utilised during the year Balance as at the end of the year General Reserve Balance as at the beginning of the year Add: Transferred from Surplus in Statement of Profit and Loss during the year Balance as at the end of the year Surplus in the statement of profit and loss Balance as at the beginning of the year Add: Net Profit/(Net Loss) for the current year Balance as at the end of the year Total 949.90 949.90 32.25 32.25 58,308.45 5,226.53 63,534.98 64,517.13 949.90 949.90 32.25 32.25 51,831.28 6,477.17 58,308.45 59,290.60

56

3M India Limited

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) March 31, 2013 March 31, 2012

5. LONG-TERM BORROWINGS
Secured Finance Lease Obligations Total 769.13 769.13 919.83 919.83

a) Finance Lease Obligations are Secured by hypothecation of assets underlying the leases. Finance Lease Obligations are payable on monthly/quarterly payment of Equated Monthly Installments beginning from the month subsequent to taking the lease.

6. LONG-TERM PROVISIONS
Provision for employee benefits Provision for Gratuity (refer note 33) Provision for Leave Encashment / Compensated Absences Others Provision for Warranty Provision for Sales Tax Total Particulars a) Warranty b) Sales Tax Total Notes: a) Warranty provisions (net of reimbursements) relates to the estimated outflow in respect of products sold by the company which are generally covered under a warranty of one to five years. b) Provision for sales tax represents mainly the differential sales tax liability on account of non-collection of declaration forms. It also represents estimates made for probable liabilities arising out of pending disputes/ litigations with sales tax and other regulatory authorities. The timing of the outflow with these matters depends on the position of law and the settlement of which is not expected to exceed two-three years in most cases. c) The Company sets up and maintains provisions for other payables when a reasonable estimate can be made. These provisions are made based on estimates made by the management that are reviewed periodically and involve quick settlements not exceeding a period of two-three years in most cases. Contingent Liabilities not provided for a) Guarantees: - Issued by Companys Bankers b) Claims against the Company not acknowledged as debts: - Income Tax matters [net of amount paid under protest Rs. 83.71 (2012: Rs. 83.71)] - Custom Duty (refer note (a) below) - Sales Tax matters [net of amount paid under protest Rs. 52.20 (2012: Rs. 52.20)] - Service Tax matters - Others (refer note 11) c) Letter of Credit 31-Mar-12 321.56 347.32 668.88 Additions 103.92 103.92 374.16 269.65 279.59 363.05 1,286.45 Reversals 41.97 88.19 130.16 253.39 184.52 321.56 347.32 1,106.79 31-Mar-13 279.59 363.05 642.64

849.65 2,015.58 1,961.51 165.19 113.42 181.77 5.08

1,192.40 1,238.70 144.52 113.42 181.77 620.08

d) Certain Industrial/ customer disputes are pending before various judicial authorities amounts not ascertainable. Notes: (a) The Company during the year had received an order from The Commissioner of Customs demanding differential duty, interest and penalty of Rs.1,961.51 Lakhs, contending the availment of concessional import duty in respect of some of its products for which a demand notice was served on the Company for payment of the above amount. The Company filed an appeal against the order including for obtaining a stay against any recovery proceedings that may be initiated and accordingly no liability has been recognised in the books. (b) Future cash outflow in respect of b) above are determinable only on receipt of judgments/ decisions pending with various forums/authorities. Capital Commitments: Estimated value of contracts in capital account remaining to be executed 1,711.61 2,806.35

57

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) March 31, 2013 March 31, 2012

7. SHORT-TERM BORROWINGS
UNSECURED Term Loan from Bank (refer note (a) below) Working Capital Loans repayable on demand from banks Total 3,440.78 12,599.65 16,040.43 6,118.96 6,118.96

(a) Term Loan from Bank is repayable after one year from the date of drawing along with the interest of 9% to 9.5% p.a.

8. TRADE PAYABLES
Dues to Micro, Small and Medium Enterprises (refer note 34 for details of Dues to Micro, Small and Medium Enterprises) Others Total 87.97 12,708.70 12,796.67 53.33 14,454.90 14,508.23

9. OTHER CURRENT LIABILITIES


Current maturities of finance lease obligations (refer note 5) Deposits from Customers Statutory Liabilities Other Liabilities Total Notes a) Deposit from customers are towards sale of goods and services repayable on completion of contractual obligation with interest. b) There are no amounts due for payment to the Investor Education and Protection Fund under Section 205C of the Companies Act, 1956 as at the year end. 562.38 1,190.47 1,208.57 6,734.30 9,695.72 553.59 1,031.29 1,241.11 6,200.26 9,026.25

10. SHORT-TERM PROVISIONS


Provision for employee benefits Provision for Leave Encashment Total 40.98 40.98 38.10 38.10

58

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated)
GROSS BLOCK Additions Disposal As at March 31, 2013 As at April 1, 2012 For the Year Disposal / Adjustments As at March 31, 2013 As at March 31, 2013 ACCUMULATED DEPRECIATION NET BLOCK As at March 31, 2012

11.

FIXED ASSETS

Particulars

As at April 1, 2012

TANGIBLE ASSETS

Owned Assets 932.78 2,320.60 204.23 3.89 377.67 162.17 61.10 1,921.48 908.16 201.34 1.67 712.23 469.65 28.56 33.20 2,266.88 882.51 347.24 32.75 1.67 18.38 20.89 29.97 2.09 18.38 10.82 1,582.46 351.25 103.49 8.93 194.86 20,751.24 5,515.84 1,803.23 150.69 1.41 12,332.12 896.22 414.84 0.63 1,310.43 7,168.38 445.81 13.68 1,197.00 496.54 1,109.50 227.95 227.95 11,021.69 13,582.86 1,136.65 7.21 1,069.88 215.69 811.98 227.95 10,504.53 13,109.66 1,037.80 5.41 1,039.90 82.08 952.22

Land

227.95

Buildings

11,400.75

Plant and Machinery

18,625.50

Furniture and Fixtures 35.38

1,389.05

Vehicles

Office Equipments 551.73

1,922.41

Data Processing Equipments

Leasehold Improvements

1,860.38

Leased Assets 900.08 410.00 36.37 786.50 4,642.47 330.27 42,458.30 9,760.82 419.13 58.22 1,147.41 236.61 36.37 14.30 410.00 102.50 160.90 11.71 1,049.27 353.81 303.56 82.00 12.20 245.46 3,544.01 11.71 20.19 244.95 645.66 184.50 26.50 461.88 13,059.88 403.61 225.50 9.87 685.53 29,398.42 546.27 307.50 22.07 549.89 28,385.28

Data Processing Equipments

Leasehold Improvements

Furniture and Fixtures

Vehicles

Total

38,146.10

INTANGIBLE ASSETS 600.17 335.94 458.09 40.99 4,683.46 15,181.54 95.45 330.27 40.99 376.93 458.09 1,435.19 43,893.49 39,540.30 600.17 600.17 136.16 55.80 792.13 10,552.95 7,922.17 80.95 5.04 85.99 3,630.00 2,703.13 244.95 72.35 600.17 217.11 60.84 878.12 13,938.00 10,552.95 159.82 397.25 557.07 29,955.49 28,987.35 199.78 402.29 602.07 28,987.35 16,532.04

Goodwill

Computer software

Land-Leasehold (ReferNotebelow)

Total

1,394.20

Total Fixed Assets

39,540.30

2012

24,454.21

3M India Limited

Note: Leasehold land represents amounts paid to Maharashtra Industrial Development Corporation (MIDC) for land including premium, paid towards fulfillment of compliance of certain conditions as mentioned in the agreement. The Company is in the process of registration of the lease agreement. In this regard, the Company has received a demand of Rs. 181.77 Lakhs from MIDC. The said demand is with respect to the differential premium for seeking change of Company's name from Birla 3M Limited to 3M India Limited in the records of MIDC. The Company has filed a Civil writ petition in the High Court at Bombay.

59

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) As at As at March 31, 2013 March 31, 2012

12. DEFERRED TAX ASSETS (NET)


Accounting for taxes on Income disclosure as per Accounting Standard 22. Major components of Deferred tax assets and liabilities on account of timing differences as at March 31, 2013 are: Asset Particulars Depreciation Provision for doubtful debts / advances Provision allowed on payments, write off 31-Mar-13 359.93 1,646.70 2,006.63 Net Deferred Tax Asset Net Deferred Tax (Credit)/ Debit for the year 906.47 (465.99) 31-Mar-12 132.10 1,425.46 1,557.56 440.48 199.45 Liability 31-Mar-13 1,100.16 1,100.16 31-Mar-12 1,117.08 1,117.08 -

The tax impact for the above purpose has been arrived by applying a tax rate of 33.99% (2012: 32.445%) being the tax rate under the tax laws that have been enacted or substantively enacted by the Balance Sheet date and applicable for Indian Companies under the Income Tax Act, 1961. Current tax for the year includes an amount of Rs. 58.94 towards tax on voluntary Transfer Pricing adjustments made by the Company relating to the financial year ended March 31, 2012 for Consumer and Office Business segment (refer note 35). Deferred Tax Assets and Deferred Tax Liabilities have been offset as they relate to the same governing taxation laws.

13. LONG-TERM LOANS AND ADVANCES


Capital Advances Unsecured, considered good 731.38 731.38 Security Deposits Unsecured, considered good 1,464.44 1,464.44 Other Loans and Advances Unsecured, considered good Advances recoverable in cash or kind or for value to be received Prepaid Expenses 30.26 0.72 30.98 Total 2,226.80 20.01 6.05 26.06 4,087.82 1,540.94 1,540.94 2,520.82 2,520.82

14. OTHER NON-CURRENT ASSETS


Long term trade receivables Unsecured, considered good Total 409.78 409.78 78.81 78.81

60

3M India Limited

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) As at As at March 31, 2013 March 31, 2012

15. INVENTORIES
Raw Materials [including in-transit Rs. 2,024.69 (2012: Rs. 2,289.42)] Work-in-progress Finished goods Stock-in-trade [including in-transit Rs. 2,391.17 (2012 : Rs.3,531.69)] Stores and Spares Packing Materials Total a) Details of Inventory of Stock-in-trade Self Adhesive Labels Surgical and Dental Products Paint Polishes Abrasives Others Total b) Details of Inventory of Work-in-progress Self Adhesive Labels Fusion Bonded Epoxy Coating Abrasives Others Total c) Details of Inventory of Finished Goods Self Adhesive Labels Fusion Bonded Epoxy Coating Abrasives Others Total 5,196.45 257.83 244.13 302.55 6,000.96 3,748.63 319.47 536.17 1,366.75 5,971.02 300.41 84.07 164.80 138.10 687.38 278.27 51.52 21.13 227.34 578.26 2,409.88 1,129.22 175.33 1,508.28 4,834.74 10,057.45 2,831.26 968.54 178.25 1,833.94 4,168.44 9,980.43 5,304.58 687.38 6,000.96 10,057.45 64.62 406.11 22,521.10 4,349.57 578.26 5,971.02 9,980.43 131.20 361.18 21,371.66

16. TRADE RECEIVABLES


Secured, considered good Outstanding for a period exceeding six months from the date they are due for payment Others Unsecured, considered good Outstanding for a period exceeding six months from the date they are due for payment Others Unsecured, considered doubtful Outstanding for a period exceeding six months from the date they are due for payment Less: Provision for doubtful debts Total 593.21 (593.21) 26,637.18 382.94 (382.94) 23,311.37 1,406.45 24,469.15 1,035.01 21,600.78 123.14 638.44 86.64 588.94

61

NOTES TO THE FINANCIAL STATEMENTS


(All amounts stated) As at in Rs. Lakhs, unless otherwise As at March 31, 2013 March 31, 2012

17. CASH AND BANK BALANCES


Cash and Cash Equivalents Cash on hand Cheques, drafts on hand Balances with banks Current Accounts Total 5,900.16 5,958.34 5,305.37 5,388.98 0.91 57.27 0.99 82.62

18. SHORT-TERM LOANS AND ADVANCES


Security Deposits Unsecured, considered good Unsecured, considered doubtful 285.28 7.64 292.92 Less: Provision for doubtful deposits (7.64) 285.28 Other Loans and Advances Unsecured, considered good Advances recoverable in cash or kind or for value to be received Advance income-tax (net of provision for taxation) Prepaid expenses Balance with Statutory/ Government Authorities Unsecured, considered doubtful Advances recoverable in cash or kind or for value to be received 514.12 5,801.74 Less: Provision for doubtful advances (514.12) 5,287.62 Total 5,572.90 54.12 6,323.31 (54.12) 6,269.19 6,388.66 729.61 331.15 351.48 3,875.38 1,483.58 704.39 361.11 3,720.11 119.47 40.85 160.32 (40.85) 119.47

62

3M India Limited

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise As at As stated) at March 31, 2013 March 31, 2012

19. REVENUE FROM OPERATIONS


Revenue from Operations Sale of Products Finished Goods Traded Goods Other operating revenue Income from Contract Research [refer note 41 (c)] Income from Management Support Services [refer note 41 (b)(ii)] Income from Duty Drawback Scrap sales Revenue from Operations (Gross) Less: Excise duty Revenue from Operations (Net) Details of Product Sold a) Finished Goods (net of excise duty) Self Adhesive Labels Fusion bonded Epoxy coating Abrasives Others Total b) Traded Goods Self Adhesive Labels Surgical and Dental Products Paint Polishes Abrasives Others Total 18,716.76 15,368.88 1,292.42 10,932.76 27,495.50 73,806.32 18,200.48 15,397.03 2,287.52 20,543.73 27,679.64 84,108.40 46,326.81 5,706.81 8,989.88 20,271.87 81,295.37 31,609.12 6,892.45 3,055.64 12,567.55 54,124.76 1,725.45 444.48 90.36 51.14 165,250.30 7,837.18 157,413.12 1,410.92 696.44 127.14 42.41 147,122.93 6,612.86 140,510.07 89,132.55 73,806.32 60,737.62 84,108.40

20. OTHER INCOME


Interest income Provision for doubtful debts written back Income from sub-lease Liabilities/ Provision no longer required written back Net Gain on foreign currency transactions and translation Miscellaneous income Total 1.07 249.92 103.69 471.40 224.26 1,050.34 11.82 229.38 134.95 114.23 36.36 526.74

63

NOTES TO THE FINANCIAL STATEMENTS


(All amounts stated) As at in Rs. Lakhs, unless otherwise As at March 31, 2013 March 31, 2012

21. COST OF MATERIALS CONSUMED


Raw Materials Opening Inventory Add: Purchases Less: Inventory at the end of the year Cost of Raw Materials Consumed Packing Materials Opening Inventory Add: Purchases Less: Inventory at the end of the year Cost of Packing Materials Consumed Sub Contracting Charges 361.18 2,562.22 406.11 2,517.29 1,951.48 61,661.73 Details of Raw Material Consumed Self Adhesive Lables Abrasives Tapes Epoxy Resin Others Total 15,463.82 6,720.49 5,059.11 3,788.56 26,160.98 57,192.96 9,930.41 2,185.01 2,926.84 2,633.25 29,516.71 47,192.22 359.52 2,384.54 361.18 2,382.88 1,780.82 51,355.92 4,349.57 58,147.97 5,304.58 57,192.96 4,799.99 46,741.80 4,349.57 47,192.22

22. PURCHASE OF STOCK-IN-TRADE


Traded Goods Purchased Details of Purchase of Stock-in-trade Self Adhesive Labels Surgical and Dental Products Paint Polishes Abrasives Others Total 9,196.94 7,061.58 441.64 5,901.89 15,532.55 38,134.60 8,047.24 5,366.76 461.41 6,488.27 21,025.37 41,389.05 38,134.60 41,389.05

64

3M India Limited

NOTES TO THE FINANCIAL STATEMENTS


(All amounts stated) As at in Rs. Lakhs, unless otherwise As at March 31, 2013 March 31, 2012

23. CHANGES IN INVENTORIES OF FINISHED GOODS WORK-IN-PROGRESS & STOCK-IN-TRADE


Stock at the beginning of the year - Work-in-progress - Finished Goods - Traded Goods Less : Stock at the end of the year - Work-in-progress - Finished Goods - Traded Goods (Increase)/ Decrease in stocks Increase/(Decrease) in Excise Duty Total 687.38 6,000.96 10,057.45 16,745.79 (216.08) (190.70) (406.78) 578.26 5,971.02 9,980.43 16,529.71 (5,838.63) (136.34) (5,974.97) 578.26 5,971.02 9,980.43 16,529.71 521.87 3,183.68 6,985.53 10,691.08

24. EMPLOYEE BENEFITS EXPENSE


Salaries, Wages and Bonus [refer note 27 (b)] [including provision for/ (write back of) Leave encashment Rs. 88.02 (2012: Rs. (28.89)] Contribution to Provident and other funds (refer note 33) [including provision for gratuity Rs. 470.77 (2012: Rs. 309.85)] Staff Welfare Expenses Total 1,382.09 21,282.17 1,251.67 18,566.27 2,020.83 1,860.93 17,879.25 15,453.67

25. FINANCE COST


Interest expense Total 951.35 951.35 318.05 318.05

26. DEPRECIATION AND AMORTIZATION EXPENSE


Depreciation on Tangible assets Amortization on Intangible assets Total 3,544.01 85.99 3,630.00 2,668.36 34.77 2,703.13

65

NOTES TO THE FINANCIAL STATEMENTS


(All amounts stated) As at in Rs. Lakhs, unless otherwise As at March 31, 2013 March 31, 2012

27. OTHER EXPENSES


Consumption of stores and spare parts Power and fuel* Water charges* Lease rental (refer note 37)* Repairs and maintenance - Building* - Plant and machinery - Others * Insurance Rates and taxes Communication * Travel and conveyance Legal and professional charges [refer note (a) below] Selling, distribution and advertisement Expenses Warranty (refer note 6) Commission on sales Freight outward (net) Royalty [refer note 41 (a)] Corporate Management Fees (Net) [refer note 41 (b)(i)] Directors' sitting fees Bad debts written off Net Loss on foreign currency transactions and translation Provision for doubtful debts (net of write back) Provision for doubtful advances and deposits Loss on sale of Fixed assets (net) Asset written off Bank charges Miscellaneous expenses * Total 793.08 1,048.67 28.43 2,195.62 416.77 656.71 281.28 355.34 564.59 226.98 426.96 939.35 38.36 2,196.97

1,354.76 520.22 201.18 422.33 2,896.61 929.90 5,847.15 69.29 675.07 1,051.96 5,268.02 7.27 249.92 460.19 460.00 34.82 72.66 1,103.43 25,690.58

1,146.91 434.85 315.66 420.85 2,708.23 815.04 4,926.76 105.07 134.00 503.14 1,195.72 4,568.79 7.20 229.38 249.53 239.80 23.09 80.00 82.93 1,279.71 23,068.30

* Net of recoveries amounting to Rs. 191.68 (2012: Rs. 191.68) recovered from 3M Electro & Communication India Private Limited, a subsidiary of 3M Company, USA. (a) Payment to Auditors (excluding service tax) As a auditor - Audit Fees - Tax Audit Fees In other Capacity - Certification and other services Reimbursement of expenses Total (b) Research & Development Expenses (refer note 32) Salaries & wages (refer note 24) Other Expenses (refer note 27) Total

40.09 6.00 19.50 0.52 66.11 1,712.09 1,713.24 3,425.33

29.00 6.00 16.20 0.42 51.62 1,669.30 1,271.69 2,940.99

66

3M India Limited

NOTES TO THE FINANCIAL STATEMENTS


(All amounts stated) As at in Rs. Lakhs, unless otherwise As at March 31, 2013 March 31, 2012

28. VALUE OF IMPORTS ON C I F BASIS: (EXCLUDING GOODS IN TRANSIT)


Raw Materials Traded goods Stores and spares Capital goods Total 29,269.53 39,625.56 67.90 3,203.73 72,166.72 24,802.67 37,073.05 68.98 69.48 62,014.18

29. EXPENDITURE IN FOREIGN CURRENCY (ACCRUAL BASIS)


Travelling expenses Corporate Management Fee Royalty Foreign Services Employees expense Others (net of tax) Total 139.53 5,268.02 1,093.01 158.73 115.43 6,774.72 196.69 4,568.79 1,123.38 173.04 73.18 6,135.08

30. VALUE OF IMPORTED AND INDIGENOUS RAW MATERIAL, STORES & SPARES AND PACKING MATERIALS CONSUMED
(As certified by the Management) March 31, 2013 % Raw Materials Imported Indigenous 80% 20% 100% Stores and Spares Imported Indigenous 25% 75% 100% Packing Material Imported Indigenous 100% 100% 2,517.29 2,517.29 March 31, 2013 100% 100% 2,382.88 2,382.88 March 31, 2012 198.27 594.81 793.08 25% 75% 100% 106.74 320.22 426.96 45,754.37 11,438.59 57,192.96 79% 21% 100% 37,281.85 9,910.37 47,192.22 Rs. % March 31, 2012 Rs.

31. EARNINGS IN FOREIGN EXCHANGE (ACCRUAL BASIS)


Export of goods Freight and insurance on exports Contract Research Re-charge of Other Services Total 2,319.91 45.47 1,725.45 444.48 4,535.31 2,210.46 47.01 1,410.92 696.44 4,364.83

67

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) March 31, 2013 March 31, 2012

32. RESEARCH AND DEVELOPMENT


During the year, the Company has received approval under section 35 (2AB) of the Income Tax Act 1961 for its recognised InHouse Research and Development Center at Bangalore with effect from July 20, 2012 to March 31, 2015. Accordingly, total revenue expenditure (net of recoveries) on Research and Development for the period July 20, 2012 to March 31, 2013 is proposed to be considered for certain Income Tax benefits.

33. EMPLOYEE BENEFITS


a) The Company has recognised, in the Statement of Profit and Loss account for the period ended March 31, 2013 an amount of Rs. 1,550.06 (2012: Rs. 1,551.08) expenses under defined contribution plans. Benefits (Contribution to) Provident Fund Superannuation Fund Employee State Insurance Corporation Total 812.39 725.92 11.75 1,550.06 765.14 769.23 16.71 1,551.08

b) The Company operates post retirement defined benefit plan for retirement gratuity which is funded. c) Details of the post retirement gratuity plan are as follows: I. Reconciliation of opening and closing balances of obligation Obligation as at the beginning of the year Current service cost Interest cost Actuarial (Gain)/ Loss Benefits paid Obligation as at the end of the year II. Change in Plan Assets (Reconciliation of opening and closing balances) Fair value of Plan Assets as at the beginning of the year Expected return on Plan Assets Actuarial Gain/ (Loss) Contributions Benefits paid Fair value of Plan Assets as at the end of the year III. Reconciliation of fair value of assets and obligations Present value of obligation as at end of the year Fair value of Plan Assets as at the end of the year Unfunded amount recognised in the Balance Sheet Recognised under: Long Term Provision (refer note 6) IV. Expense recognised during the year Current service cost Interest cost Expected return on Plan Assets Actuarial (Gain)/ Loss Expense recognized during the year 191.13 104.43 (85.19) 260.40 470.77 161.58 76.82 (63.25) 134.70 309.85 374.16 253.39 1,744.56 (1,370.40) 374.16 1,271.74 (1,018.35) 253.39 1,018.35 85.19 31.81 350.00 (114.95) 1,370.40 739.56 63.25 8.11 300.00 (92.57) 1,018.35 1,271.74 191.13 104.43 292.21 (114.95) 1,744.56 983.10 161.58 76.82 142.81 (92.57) 1,271.74

68

3M India Limited

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) March 31, 2013 V. Investment Details of Plan Assets Insurer Managed Fund VI. Assumptions Discount Rate (per annum) Interest Rate (per annum) Estimated Rate of return on Plan Assets (per annum) Rate of Escalation in Salary (per annum) 2013 (12 Months) VII.Experience History Defined Benefit Obligation at the end of the year Plan Assets at end of the year Fund Status Experience Gain / (Loss) adjustments on plan liabilities Experience Gain / (Loss) adjustments on plan assets Actuarial Gain / (Loss) due to change on assumptions Notes: a) The estimates of future salary increases, considered in actuarial valuation take account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market. b) As per management estimate, contribution of Rs. 200.00 (2012: Rs. 200.00) is expected to be paid to the plan during the year ending March 31, 2014. March 31, 2013 34. March 31, 2012 (1,744.56) 1,370.40 (374.16) (208.43) 31.81 (83.78) (1,271.74) 1,018.35 (253.39) (194.95) 8.11 52.14 (983.10) 739.56 (243.54) (198.78) 1.32 (56.43) (646.37) 610.60 (35.78) (9.68) 19.00 186.53 (721.36) 477.58 (243.78) 37.69 (4.66) (248.56) 2012 (12 Months) 8.10% 7.50% 7.50% 6.00% 2011 (12 Months) 2010 (15 Months) 8.60% 7.50% 7.50% 6.00% 2008 (12 Months) 100% 100% March 31, 2012

DISCLOSURE OF DUES / PAYMENTS TO MICRO, SMALL AND MEDIUM ENTERPRISES TO THE EXTENT SUCH ENTERPRISES ARE IDENTIFIED BY THE COMPANY. (a) (i) The principal amount remaining unpaid as at year end 68.14 38.99 (ii) Interest due thereon remaining unpaid as at year end 19.83 14.34 (b) The amount of interest paid by the buyer in terms of section 16 of the Micro, Small and Medium Enterprises Development Act, 2006, along with the amount of the payment made to the supplier beyond the appointed day during each accounting period: (i) Delayed payment of principal amount paid beyond the appointed date during the entire accounting period. (ii) Interest actually paid under Section 16 of the Act, during the entire accounting period. (c) The amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the period) but without adding the interest specified under the Micro, Small and Medium Enterprises Development Act, 2006. (d) The amount of interest accrued and remaining unpaid as at year end (i) Total interest accrued during the period 17.21 8.69

69

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) March 31, 2013 March 31, 2012

(ii) Total Interest remaining unpaid out of the above as at period end. (e) The amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of disallowance as a deductible expenditure under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006. 2.62 5.65 Note: The above information has been determined based on vendors identified by the Company and confirmed by the vendors.

35. The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective April 1, 2001), detailed Transfer Pricing
regulations for computing the taxable income and expenditure from international transactions between associated enterprises on an arms length basis. These regulations, inter alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant within due date of filing the Return of Income. For the financial year ending March 31, 2012, the Company had undertaken a study to comply with the said transfer pricing regulations for which the prescribed certificate of the Accountant has been obtained and accordingly company has recognised an amount of Rs. 58.94 towards tax on voluntary Transfer Pricing adjustments relating to the financial year ended March 31, 2012 for Consumer and Office Business segment. For the fiscal year March 31, 2013, the Company is in the process of updating the transfer pricing study to comply with the said regulation. The management do not envisage any tax implication arising based out of such study.

36. RELATED PARTY TRANSACTIONS:


Summary of the monetary value of the transactions with the related parties is as follows: Holding Company I. a. b. c. d. e. f. II. a. b. c. Expenses Purchase of materials (net of returns) Remuneration to Directors Corporate Management Fee Royalty Recharge of expenses paid Lease rental expenses Income Sale of goods Income from Contract Research Income from Management Support Services 24,403.87 (21,230.95) (-) 5,105.48 (4,391.92) 1,093.01 (1,123.38) 158.73 (173.04) (-) 62.49 (-) 1,725.45 (1,410.92) 396.53 (662.68) 234.46 (-) 1,754.53 (44.73) 995.14 (541.50) 3,025.10 (3,445.98) 32,108.29 (31,385.97) (-) 162.54 (176.87) (-) 12.28 (-) (-) 2,389.85 (2,286.01) (-) 47.95 (33.76) 467.35 (538.59) 294.75 (24.76) 464.49 (814.48) 4,565.19 (5,787.33) (-) 552.07 (551.35) (-) (-) (-) (2.20) (-) (-) (-) (-) (-) (-) (-) 56,512.16 (52,616.92) 552.07 (551.35) 5,268.02 (4,568.79) 1,093.01 (1,123.38) 171.01 (173.04) (2.20) 2,452.34 (2,286.01) 1,725.45 (1,410.92) 444.48 (696.44) 701.81 (538.59) 2,049.28 (69.49) 1,459.63 (1,355.98) 7,590.29 (9,233.31) Fellow Subsidiaries Key Management Personnel Total

III. Others Recharge/ Reimbursement of expenses received IV. Purchase of Capital Goods V. a. b. Balances Outstanding receivables Outstanding payables

70

3M India Limited

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) Disclosure in respect of transactions which are more than 10% of the total transactions of the same type with related parties. Relationship March 31, 2013 March 31, 2012

Sale of Goods 3M Gulf Limited 3M United Kingdom PLC Reimbursement of Expenses Received 3M Electro & Communication India Private Limited 3M Philippines 3M Indonesia Limited Remuneration to Directors Ajay Nanavati B.V. Shankaranarayana Rao Sadhana Kaul R. Vijay Kumar (31st October, 2011 to 26th October, 2012) Purchase of Capital Goods 3M Canada Company 3M Electro & Communication India Private Limited Purchase of Material 3M Innovation (SG) Singapore 3M Apac Rdc Pte Ltd Sumitomo 3M Limited Names of related parties and description of the relationship: i) Holding Company 3M Company, USA Ajay Nanavati B.V. Shankaranarayana Rao Sadhana Kaul R. Vijay Kumar [refer note (e) below] Notes: a) b) c) d) e) f) The above does not include related party transactions with retiral funds, as the key management personnel who are trustees of the funds cannot individually exercise significant influence on the retiral fund transactions. The above information has been determined to the extent such parties have been identified on the basis of information available with the Company. None of the relatives of the Directors of the Company have any interest in any companies, firms, body corporate with which transactions have been entered into during the period. As gratuity and compensated absences are computed for all the employees in aggregate, the amounts relating to the Key Managerial Personnel cannot be individually identified. Appointed as Director with effect from 31 October, 2011 and resigned as Director with effect from 26 October, 2012. Figures in brackets relates to the previous year. Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary 3,718.15 5,818.83 5,645.76 3,541.54 1,303.02 5,243.66 Fellow Subsidiary Fellow Subsidiary 283.59 23.70 Key Management Personnel Key Management Personnel Key Management Personnel Key Management Personnel 272.05 116.72 109.63 53.67 270.91 111.57 110.72 58.15 Fellow Subsidiary Fellow Subsidiary Fellow Subsidiary 191.68 131.03 120.60 191.68 91.84 255.07 Fellow Subsidiary Fellow Subsidiary 1,175.68 292.65 1,819.48 -

ii) Key Management personnel

71

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) March 31, 2013 March 31, 2012

37. ASSETS TAKEN ON LEASE


Operating Lease: The Company has taken office premises, warehouse, residential premises, vehicles and office equipment under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and lessee. The initial tenure of the lease is generally for eleven months to ninety six months. The minimum rental payments under the operating leases under noncancellable lease term as at March 31, 2013 is as under: Minimum Lease payments Lease rental charged to profit and loss account Minimum lease payments not later than one year Minimum lease payments later than one year but not later than five years Minimum lease payments later than five years Finance Lease: The Company has taken vehicles, office equipment and furnitures under finance lease agreements. The minimum rental payments under the finance leases as at March 31, 2013 are as under: Minimum Lease payments Minimum lease payments not later than one year Minimum lease payments later than one year but not later than five years Minimum lease payments later than five years Present Value of Minimum Lease payments Minimum lease payments not later than one year Minimum lease payments later than one year but not later than five years Minimum lease payments later than five years 654.58 684.52 599.15 874.18 687.20 825.07 623.73 1,024.20 2,195.62 1,743.56 3,989.66 2,196.97 1,138.05 4,249.80 -

The Company had entered in an agreement for sub-lease of office premises. The sub-lease was for a term of three year, which expired on December 31, 2012. The future minimum lease under this sub-lease agreement is as under: Income from sub-lease Minimum lease rentals up to one year Minimum lease rentals later than one year but not later than five years Minimum lease rentals later than five years Note: There are no assets attached to the office premises under sub-lease. 103.69 134.95 51.96 -

38. EARNING PER SHARE


Net profit attributable to equity shareholders Weighted average number of equity shares outstanding during the year Face value of equity share (Rs.) Basic and diluted earnings per share (Rs.) 5,226.53 11,265,070 10.00 46.40 6,477.17 11,265,070 10.00 57.50

72

3M India Limited

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) March 31, 2013 March 31, 2012

39. SEGMENT REPORTING


Segment Revenue (net sale / income) a) b) c) d) e) f) Industrial and Transportation Business Health Care Business Safety, Security and Protection Services Business Consumer and Office Business Display and Graphics Business Others * 77,179.01 22,147.86 19,407.29 14,427.07 21,960.42 2,291.47 157,413.12 69,120.11 18,283.91 20,017.90 12,256.96 18,507.52 2,323.67 140,510.07

Net sales/ income from operations Segment Results (Profit before interest and tax) a) b) c) d) e) f) Industrial and Transportation Business Health Care Business Safety, Security and Protection Services Business Consumer and Office Business Display and Graphics Business Others *

5,507.93 1,150.95 309.01 (544.56) 662.82 334.67 7,420.82 951.35 1,050.34 7,519.81

5,717.41 1,117.69 1,259.06 (396.05) 1,337.60 366.66 9,402.37 318.05 526.74 9,611.06

Total Segment Results Less : Interest expense Add: Other un-allocable income net off un-allocable expenditure Total profit before taxation Segment Assets a) b) c) d) e) Industrial and Transportation Business Health Care Business Safety, Security and Protection Services Business Consumer and Office Business Display and Graphics Business

50,543.61 10,603.25 14,445.14 6,978.41 7,859.39 15,843.22 106,273.02

40,496.36 7,672.15 14,435.30 5,021.53 7,283.68 17,226.25 92,135.27

Unallocated corporate assets Total Segment Assets Segment Liability a) b) c) d) e) Industrial and Transportation Business Health Care Business Safety, Security and Protection Services Business Consumer and Office Business Display and Graphics Business

11,410.01 3,382.60 3,002.24 2,552.73 3,826.64 16,455.16 40,629.38

11,080.76 3,021.25 3,301.56 2,226.93 3,021.91 9,065.75 31,718.16

Unallocated corporate liability Total Segment Liability

73

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) March 31, 2013 Capital Expenditure a) b) c) d) e) f) Industrial and Transportation Business Health Care Business Safety, Security and Protection Services Business Consumer and Office Business Display and Graphics Business Others 5,977.74 3,911.07 434.72 2,659.36 105.58 1,599.81 14,688.28 2,845.81 1,090.10 1,290.95 753.29 437.17 1,424.16 7,841.48 March 31, 2012

Total Capital Expenditure Depreciation Expenses a) b) c) d) e) f) Industrial and Transportation Business Health Care Business Safety, Security and Protection Services Business Consumer and Office Business Display and Graphics Business Others

1,809.02 457.26 418.38 311.42 251.08 382.84 3,630.00

1,507.89 317.37 415.22 225.23 134.03 103.39 2,703.13

Total Depreciation Non Cash Expenses Other than Depreciation a) b) c) d) e) f) Industrial and Transportation Business Health Care Business Safety, Security and Protection Services Business Consumer and Office Business Display and Graphics Business Others

471.01 130.82 125.54 66.17 123.04 3.61 920.19

118.94 29.26 40.76 14.75 25.92 10.17 239.80

Total Non Cash Expenditure *includes Domestic sales/ Income Export sales

86.95 2,204.52

75.55 2,248.12

Segments have been identified in line with the Accounting Standard on Segment Reporting (AS-17), taking into account the organization structure as well as the differential risks and returns of these segments. Segment revenue, results and capital employed figures include the respective amounts identifiable to each of the segments. Other unallocable income net off unallocable expenditure are towards common services to the segments which are not directly identifiable to the individual segments as well as those at a corporate level which relate to the Company as a whole. The Company operates mainly to the needs of domestic market and export turnover is not significant in context of total turnover. Accordingly, there are no reportable geographical segments. Presently, the Companys operating results were managed on the basis of its existing segment structures viz., Industrial and Transportation, Health Care, Display and Graphics, Consumer and Office and Safety, Security and Protection Services through April 2012 to March 2013.

74

3M India Limited

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated) The products included in each of the reported segments are as follows: (a) Industrial and Transportation Business: Major products under this segment include vinyl, polyester, foil and specialty industrial tapes and adhesives: Scotch Masking Tape, Scotch Filament Tape and Scotch Packaging Tape; Functional and Decorative Graphics; Abrasion-Resistant Films, Masking Tapes and Other Specialty Materials. Health Care Business: Major products include medical and surgical supplies, medical devices, skin & wound care and infection prevention products & solutions, drug delivery systems, dental and orthodontic products and food safety products. Safety, Security and Protection Services Business: Major product under this segment include personal protection products, brand & asset protection solutions, border control products, passive fire protection products for industries and commercial establishments, track and trace products, cleaning and hygiene roducts for the hospitality industry. Consumer and Office Business: Consumer and Office Business includes products such as Scotch brand, addressing the Home & Office tapes, Adhesives, Packaging protection platforms; Post-it brand with a product range of Note Pads, Dispensers, Flagging solution, Labels and Scotchguard brand addressing the stain protection market. Display and Graphics Business: Display & Graphics Business consists of four divisional subsets- the Traffic Safety Systems Division (TSSD), the Commercial Graphics Division (CGD), the Architectural Markets Division (AMD) and the Mobile Interactive Solutions Division (MISD). TSSD products include retro reflective traffic signs for highways and cities, pavement marking and vehicle registration products and services. CGD portfolio includes products like films, inks and digital signage products. AMD products includes wall and glass cladding products coupled with architectural interior services and environmental graphics for home and office spaces. MISD products include projection systems, computer and ATM-screen privacy filters and brightness enhancement films for television, avionics and automotive displays. Consistent with 3Ms global strategy of building relevance and presence in the marketplace, the Company will also align resources and management towards a new revised structure comprised of five business groups: Consumer; Industrial; Health Care; Safety and Graphics; and Energy, with the intention that results be managed under the new alignment once it is fully effective from April 1, 2013 onwards.

b)

c)

d)

e)

40. STOCK OPTION


3M Company, USA (3M), the parent company has offered General Employees Stock Purchase Plan to all the employees of the Company. In accordance with the plan, the Company during the year has deducted for remittance a sum of Rs. 49.31 (2012: Rs. 44.36) and cumulatively amounting to Rs. 310.38 (2012: Rs. 261.07) from the salary of the employees who have opted for the plan. As of the year end a sum of Rs. 4.69 (2012: Rs. 3.42) is pending remittance to the holding company and the same is included under Other Current Liabilities (refer note 9). 3M Company, USA (3M) has established 3M Company Long Term Incentive Plan (LTIP) / Management Stock Ownership Program (MSOP). As a part of the plan, Executive Directors and Senior Executives of 3M India Limited (3M India) are eligible to acquire shares of 3M via stock options, stock appreciation rights (SARs), restricted stock units (RSUs) and performance shares. The eligible employees are granted stock options / stock appreciation rights (SARs)/ restricted stock units (RSUs) which will vest with the employees over a period of 3 years from the date of the grant and they can exercise the stock option within a stipulated period mentioned in the plan. 3M measures compensation expense for stock appreciation rights (SARs) and restricted stock units (RSUs) at their fair value determined using Black Scholes Model on the date of Grant for respective countries including India. Accordingly, an amount of Rs.299.59 (2012: Rs. 319.81 ) has been debited to the Statement of Profit and Loss account for the year and included under Employee benefit Expenses. During the year the Company has granted to employees of the Company 16,600 stock appreciation rights (SARs) (2012: 8,858) and 3,320 restricted stock units (RSUs) (2012: 1,968) on various dates of which none are vested. However 3,917 stock appreciation rights (SARs) (2012: 2,547) and 3,233 restricted stock units (RSUs) (2012: 2,848) were settled on account of being fully vested and exercised resulting in an outstanding balance of 44,283 stock appreciation rights (SARs) (2012: 34,734) and 10,930 restricted stock units (RSUs) (2012: 10,371) at the end of the year. The above disclosure as per Guidance Note on Accounting for Employee Share based Payment issued by ICAI is made to the extent the necessary information is available with the Company.

75

NOTES TO THE FINANCIAL STATEMENTS


(All amounts in Rs. Lakhs, unless otherwise stated)

41. INTERCOMPANY AGREEMENTS/ ARRANGEMENTS:


a) Intellectual Property Agreement The Company had entered into Intellectual Property agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for the payment of license fees in the form of royalties. Payments were waived off for a period of 3 years effective from July 1, 2006 to June 30, 2009. These payments have been reinstated with effect from July 1, 2009. Accordingly, the Company has incurred an expenditure of Rs. 1,051.96 (2012: Rs. 1,195.72) for the period April 1, 2012 to March 31, 2013. b) (i). Support Services/Corporate Management Fees The Company has entered into support services agreement with 3M Company., USA (having expertise in establishing, operating and managing international business and incurring costs in developing, manufacturing, marketing and selling a diverse portfolio of products) with effect from April 1, 2009. The Company is charged with comprehensive support services charges by 3M Company USA for the services received from all the 3M group companies in the areas of Laboratory, Technical Assistance and Manufacturing, Selling and Marketing, Strategic and Managerial, Information Technology, Routine Administration and Foreign Services Employees Expenses. This agreement supersedes the agreement entered by the Company with 3M Asia Pacific Pte Limited dated January 1, 2003 which was terminated on March 31, 2009. The Company has also entered into support services agreement (MOUs) with 3M Hong Kong Ltd with effect from January 1, 2011. The Company is charged with comprehensive support services charges by 3M Hong Kong Ltd for the services rendered in the area of Laboratory, Technical Assistance and manufacturing, Selling and marketing and strategic and managerial. This agreement is in addition to the agreement already entered by the Company with 3M Company USA dated April 1, 2009. March 31, 2013 The Company has incurred the following expenditure: Laboratory and Technical Assistance Manufacturing Services Selling and Marketing Services Information Technology Services Other Managerial Services Total - Foreign Services Employees Expense are included in Employee Costs amounting to 524.29 3,630.88 567.03 545.82 5,268.02 158.73 568.15 2,979.94 482.06 538.64 4,568.79 173.04 March 31, 2012

The Company has accrued an amount of Rs. 1,300.00 (2012: Rs. 1,250.00) in respect of estimated liability for the above services during period January 1, 2013 to March 31, 2013; the actual liability would be ascertained by December 2013. (ii).The Support Service Agreement enables the Company to recharge expenses relating to Foreign Service Employees (FSEs) of 3M Company and its affiliates consistent with 3M Companys Global Financial Standard on FSEs. Accordingly the Company has recognized a receivable of Rs. 702.98 (2012: Rs. 696.44). c) Contract Research Agreement The Company has entered into contract research agreement with 3M Innovative Properties Company and 3M Company, USA effective July 1, 2006 for carrying out contract research activities. During the year, Company has recognized an income of Rs. 1,725.45 (2012: Rs. 1,410.92).

42. Previous years figures have been regrouped / reclassified wherever necessary to conform to current year classification.

For Lovelock & Lewes Firm Registration No.301056E Chartered Accountants Dibyendu Majumder Partner Membership No: 057687 Place : Bangalore Date : May 30, 2013 Place : Bangalore Date : May 30, 2013

For and on behalf of the Board

Ajay Nanavati Managing Director Zinan Wadood Chief Financial Officer

Sadhana Kaul Whole-time Director V.Srinivasan Company Secretary

76

3M India Limited

3M INDIA LIMITED
Regd Office: Plot Nos. 48-51, Electronics City, Hosur Road, Bangalore - 560 100

3M INDIA LIMITED
Regd Office: Plot Nos. 48-51, Electronics City, Hosur Road, Bangalore - 560 100

ATTENDANCE SLIP
(To be presented at the entrance) 26TH ANNUAL GENERAL MEETING ON TUESDAY, JULY 23, 2013 AT 10.30 A.M. at The Grand Ball Room, Hotel Chancery Pavilion, 135, Residency Road, Bangalore 560 025

PROXY FORM
I/We.............................................................................................of .......................................................................in the district of .......................................................... being a member(s) of the above named Company, hereby appoint ..............................................................................................................of ..............................................................................in the district of.............................................................................or failing him/her of

Folio No......................................................DP ID No................................................. Client ID ...................................................................................................

.........................................................................in the district of .......................................................................................as my/our

proxy to attend and vote for me/us and on my/our behalf at the 26TH Annual General Meeting of the Company to be held on TUESDAY, JULY 23, 2013 AT 10.30 A.M. at The Grand Ball Room, Hotel Chancery Pavilion, 135, Residency Road,

Name of the Member: ................................................................................................

Signature:............................................................................................................................

Bangalore 560 025 and at any adjournment thereof. Folio No......................................................DP ID No.................................................

Name of the Proxy holder: ....................................................................................

Client ID .................................................................................................. No. of shares held............................................................................. Signed this ...................................... day of .....................2013. Signature Revenue
Stamp Affix

Signature:............................................................................................................................

NOTES: 1. 2. Only Member/Proxy holder can attend the meeting. Member/Proxy holder should bring his/her copy of the Annual Report together with this Attendance slip duly filled in at the meeting. Bodies Corporate, whether a Company or not, who are members, may attend through their authorised representatives appointed under Section 187 of the Companies Act, 1956. A copy of authorisation should be deposited with the Company.

This form is to be used ** In favor of the resolution. ** against Unless otherwise instructed, the Proxy will act as he thinks fit. ** Strike out whichever is not desired. NOTES: 1. This Proxy Form must be lodged with the Company at its Registered Office: Plot Nos. 48-51, Electronic City, Hosur Road, Bangalore 560100 OR at the Corporate Office, at Concorde Block, UB City, 24, Vittal Mallya Road, Bangalore 560 001, not less than FORTY-EIGHT HOURS before the time for holding the aforesaid meeting. 2. Those Members who have multiple folios with different joint holders may use copies of this Attendance slip/Proxy. In case of joint shareholders, all must sign the proxy form.

3.